- The USD/body while the US dollar corrects downward on Monday.
- The US Treasury Secretary, Scott Besent, is scheduled to meet with Chinese officials on Monday.
- The optimistic feeling of possible commercial conversations between the US and China relieved concerns about the tariff war between the US and Canada.
The USD/CAD goes back its earnings from the previous session, quoting around 1,3680 during Monday’s Asian hours. The low pair while the US dollar (USD) corrects down after registering approximately 0.50% profits on Friday after US employment data for May. The strongest expected data increased the possibilities that the Federal Reserve (FED) maintain its reference interest rate without changes in its next two monetary policy meetings.
The US Labor Statistics Office (BLS) reported that the US non -agricultural payroll (NFP) increased by 139,000 in May compared to the increase of April 147,000 (reviewed since 177,000). This reading exceeded the market consensus of 130,000. In addition, the unemployment rate remained stable at 4.2% and the average average earnings per hour remained unchanged at 3.9%, both readings were stronger than expected by the market.
The US dollar could gain ground amid the decrease in nerves by the commercial war. US President Donald Trump and Chinese President Xi Jinping spoke and agreed on Thursday that officials from both parties would soon resume trade negotiations aimed at ending the commercial war. The US Treasury Secretary, Scott Besent, and two other Trump administration officials are scheduled to meet with Chinese officials on Monday.
The positive feeling around commercial conversations between the US and China also weakens the concerns that American tariffs about steel and aluminum would drown Canadian exports. Last week, Trump signed an executive order to double, from 25% to 50%, tariffs on steel and aluminum. Prime Minister Mark Carney described the “illegal and unjustified” tariffs. Carney emphasized that the government is committed to intensive and live negotiations to eliminate these and other tariffs as part of a new economic and security association with the United States.
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD also rises, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the CAD direction. A strong economy is good for the Canadian dollar. Not only attracts more foreign investment, but it can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
