- The USD/CAD goes down around 1,3730 in the first Asian session on Tuesday.
- The governor of the Fed, Bowman, said that the time to cut the interest rates is approaching.
- The hopes of de -escalation of the conflict in the Middle East after Iran’s attack against an American base weakens the US dollar.
The USD/CAD pair operates with slight losses about 1,3730 during the first Asian session on Monday. The moderate comments of the Federal Reserve officials (FED) and the decrease in tensions in the Middle East weigh on the US dollar (USD). Investors prepare for the semiannual testimonies of President Jerome Powell and the publication of consumer’s confidence in the US later on Tuesday.
Fed’s supervision vice president Michelle Bowman said on Monday that the time to cut interest rates is approaching, since the risks to the labor market can be increasing. Bowman added that inflation seems to be on a sustained road back to 2% and is less concerned that tariffs cause an inflation problem. His moderate comments have dragged the US dollar downwards against the Canadian dollar (CAD).
Iran shot missiles against the Udeid Air Base in Qatar on Monday. Qatar officials said that the brainstorm was intercepted and that the base had been evacuated in advance. Reuters reported early Tuesday that US President Donald Trump said that a high “complete and total” fire between Israel and Iran will enter into force to put an end to the conflict between the two nations.
A senior Iranian official confirmed Reuters that Tehran accepted a high fire mediated by Qatar and proposed by the US with Israel. The hopes of de -escalation of the conflict in the Middle East weakens the refuge license as the US dollar.
Meanwhile, a fall in crude oil prices could weigh on the Canadian dollar linked to raw materials and limit the decline for torque. It is worth noting that Canada is the largest oil exporter to the US, and the lowest prices of crude oil tend to have a negative impact on the value of the CAD.
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.
