- The USD/CAD records modest profits around 1,3645 in the first Asian session on Wednesday.
- The US Jolts employment offers increased to 7.76 million in May, more than expected.
- The operators prepare for the US USE Change Report of June, which will be published later on Wednesday.
The USD/CAD pair operates with slight profits about 1,3645 during the first Asian session on Wednesday. The US dollar (USD) reduces losses against the Canadian dollar (CAD) after the data showed an increase in demand for the labor market better than expected. The US employment change report for June will be the center of attention later on Wednesday.
Employment offers in the US increased unexpectedly in May, which provides some support to the dollar, since the Federal Reserve (Fed) will probably take time to cut interest rates. The US Jolts employment offers rose to 7.76 million in May, compared to 7,395 million offers reported in April. This figure exceeded the expectation of the market of 7.3 million.
The president of the FED, Jerome Powell, reiterated that the US Central Bank will wait for more data before beginning to make monetary policy more flexible, but did not rule out a reduction of rates at the July meeting, according to Reuters. The Fed decided to maintain the stable reference interest rate again last month, maintaining federal funds in the same range between 4.25% and 4.5%, where it has been since December.
Meanwhile, crude oil prices lose ground amid the decrease in geopolitical risks in the Middle East and a possible increase in Opec+ production in August. This could weaken the CAD linked to raw materials. However, the rebound in crude oil prices could limit the bullish potential for the torque, since Canada is the largest oil exporter to the US, and the highest prices of crude oil tend to have a positive 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.
