- The USD/CAD wins in the midst of a growing risk aversion fed by concerns about the imminent automotive tariffs of the United States.
- The US president, Donald Trump, has threatened additional measures against the EU and Canada if they respond.
- The operators now focus on the US PCE price index and Canada GDP data that will be published on Friday.
The USD/CAD continues its bullish impulse for the second consecutive day, quoting around 1,4310 during Friday’s Asian hours. The torque benefits from greater risk aversion driven by growing concerns about the imminent automotive tariffs of the United States.
On Wednesday, the US president, Donald Trump, signed an order by imposing a 25% tariff on car imports and warned about more measures against the EU and Canada if they respond. This escalation in commercial tensions will probably tense relations with key commercial partners, particularly before the reciprocal tariffs scheduled for April 2 enter into force. The Canadian dollar (CAD) faces winds against, since approximately 75% of Canada’s exports, including oil and cars, are intended for the United States (USA).
However, the bullish potential for the USD/CAD torque can be limited, since the US dollar (USD) remains under pressure due to the fall in yields of treasure bonds. At the time of writing, 2 -year bonus yield is 3.99%, while 10 -year yield is in 4.35%. However, Moody’s has warned that the increase in tariffs and tax cuts could significantly expand the US government deficit, which could lead to a reduction in debt rating and an increase in treasure yields.
In the economic field, the US Gross Domestic Product (GDP) expanded at an annualized rate of 2.4% in the fourth quarter of 2024, exceeding the provision of 2.3%, according to the data published on Thursday. Investors now focus on the US Personal Consumption Expenditure Index (PCE) on Friday to obtain more clarity on the monetary policy of the Federal Reserve (FED). Meanwhile, the data of the Gross Domestic Product (GDP) of Canada will also be observed later in the North American session.
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.
