- The USD/CAD quotes with moderate profits around 1,4310 in the American session on Thursday.
- Trump imposed a 25% tariff on imported cars and light trucks, which will enter into force on April 2.
- The US GDP grew at an annualized rate of 2.4% in the period from October to December.
The USD/CAD pair records modest profits about 1,4310 during the Thursday’s late American session. The Canadian dollar (CAD) weakens after the US president, Donald Trump, announced commercial taxes on cars, expanding the global commercial war. Investors expect the publication of the US Personal Consumption Expenditure Index (PCE), which will be published later on Friday.
Trump signed a proclamation on Wednesday to implement a 25% tariff to car imports and promised a more severe punishment to the EU and Canada if they join against the US. This development weakens to the CAD and acts as a tail wind for the pair, since Canada sends approximately 75% of its exports to the United States, including oil and car. The aggressive commercial measures of Trump seem to be destined to worsen relations with the main commercial partners, even before their so -called reciprocal tariffs scheduled for April 2.
The US economy expanded at an annual rate of 2.4% in the last three months of 2024, supported by an increase in consumer spending at the end of the year, according to the third figures report of the Office of Economic Analysis on Thursday. This figure was slightly better than the previous estimate of the growth of the fourth quarter. However, the perspective is more uncertain, since Trump’s commercial policies could increase inflation and harm growth. This, in turn, could exert some sale pressure on the dollar against 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.
