- The USD/CAD weakened after reports that Canada could face the lowest level of American tariffs on April 2.
- While President Trump supposedly considers a three -level tariff system, some sources suggest that this approach is not yet official.
- The governor of the Federal Reserve, Adriana Kugler, reiterated that the Fed monetary policy remains restrictive and is properly positioned.
The USD/CAD extends its loss streak per third consecutive session, around 1,4270 during Wednesday’s Asian negotiation hours. The fall of the torque is driven by a strengthening of the Canadian dollar (CAD) after reports of the “Toronto Star” that suggest that Canada could face the lowest level of US tariffs on April 2.
The US president, Donald Trump, is supposedly considering a three -level tariff system, although some sources indicate that this approach is not yet official. However, it aligns with government expectations for next week.
In addition, the CAD benefits from the increase in oil prices, backed by supply concerns in the middle of the tensions climbing in the Middle East and a more pronounced fall than expected in the US oil reserves of the US oil.
However, the fall of the USD/CAD torque could be limited since the US dollar (USD) gains support as market caution increases before the tariff announcement of President Donald Trump on April 2. The US dollar index (DXY), which tracks the USD compared to six main currencies, recovered its recent losses from the previous session and is quoted around 104.30 at the time of writing.
In addition, the dollar finds support in the hard line comments of the Governor of the Federal Reserve, Adriana Kugler. On Tuesday, Kugler emphasized that Fed’s interest rates policy remains restrictive and well positioned. Kugler also pointed out that progress towards the inflation target of 2% has slowed since last summer and described the recent increase in assets inflation as “little useful.”
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.
