- The USD/CAD wins up to about 1,4260 due to the low yield of the Canadian dollar.
- The weak data of the Canadian labor market have promoted the moderate bets of the BOC.
- Trump tariffs have exposed the US economy to a recession.
The USD/CAD torque rises to about 1,4260 during negotiation hours in North America on Monday. The Loonie Par gins land as the Canadian dollar (CAD) faces sales pressure amid increasing expectations that the Canada Bank (BOC) could continue to reduce interest rates this year.
A new escalation in moderate BOC bets has been caused by the weak employment data of March, published on Friday. Canada statistics reported that the workforce saw a reduction of 32.6 workers, while economists expected the economy to have added 12,000 new employment search engines. The unemployment rate accelerated to 6.7%, as expected. In addition, average hourly salaries slowed at a faster rate, up to 3.5%. Such scenario increases the need for greater relief of monetary policy by Boc.
Meanwhile, the US dollar (USD) strives to gain ground after remained significantly volatile in the latest negotiation sessions. The US dollar index (DXY), which tracks the value of the dollar against six main currencies, recovers its intra -losses and stabilizes about 103.00.
However, the prospects of the US dollar remain uncertain, since the imposition of reciprocal tariffs by the president of the United States (USA), Donald Trump, has tarnished internal perspectives. Financial market participants have become increasingly confident that Trump’s tariffs could lead to an economic recession, since their impact will mainly fall on US importers.
On Friday, the president of the Federal Reserve (FED), Jerome Powell, also warned that President Trump’s protectionist policies could result in a resurgence of inflation and slower economic growth.
This week, investors will focus on the consumer price index (CPI) and the US Production Price Index (IPP) for March, which will be published on Thursday and Friday, respectively.
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.
