- The USD/CAD struggles to record a significant recovery in the midst of a combination of factors.
- A rebound in oil prices supports the Loonie and eclipses the modest strength of the USD.
- The hope of a commercial agreement between the US and Canada further benefits the CAD and weighs on the main torque.
The USD/CAD pair extends its bass and consolidative price action when entering the European session on Thursday and is currently negotiated around the area of ​​1,3670-1.3665, just above the lowest level since October 2024 reached the previous day. Meanwhile, the fundamental background seems to lean in favor of the bassists and suggests that the path of lower resistance for cash prices remains down.
The reports that a commercial agreement between the US and Canada could occur before the G7 summit on June 15, together with the decision of the Bank of Canada (BOC) to maintain the stable interest rates on Wednesday, they could continue to support the Canadian dollar (CAD). In addition, a modest rebound in crude oil prices could benefit the Loonie linked to raw materials and validate the negative perspective for the USD/CAD torque in the midst of the underlying bearish feeling around the US dollar (USD).
The operators increased the bets that the Federal Reserve (FED) will cut the interest rates in the September policy meeting after the economic data of the US weakest than the expected Wednesday. This led to the night fall in the yields of the US treasure bonds at 2 years, sensitive to the fees, and in the 10 -year reference bonus, at its lowest level since May 9. In addition, concerns about the worsening of US fiscal conditions and the persistent uncertainties related to trade should contribute to limiting any significant appreciation of the USD.
The aforementioned negative factors suggest that any attempt of recovery could be seen as an opportunity for sale and remain limited. The operators now expect the publication of the initial weekly applications for unemployment subsidy in the US, which, together with the Speeches of influential members of the FOMC, will boost the demand of the USD. Apart from this, the dynamics of oil prices should generate short -term opportunities around the USD/CAD torque in the crucial use of monthly US employment data and Canada.
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.
