- The USD/CAD could face down pressure as the US dollar weakens, possibly due to the increase in commercial tensions.
- President Donald Trump’s proposal to impose a 100% tariff on films manufactured abroad has increased renewed protection policies.
- The Canadian dollar is recovering in line with other currencies of the G10, supported by the decrease in concerns about the recession.
The USD/CAD remains stable around 1,3800 during the Asian session on Monday, after a fall on the previous negotiation day. The bunder impulse for the torque can be limited as the US dollar (USD) faces pressure, potentially due to renewed commercial tensions. President Donald Trump announced plans to instruct the US Trade Representative and the Commerce Department to start a 100% tariff to films made abroad.
The US dollar index (DXY), which tracks the dollar against six main currencies, is in decline for the second consecutive day, quoting about 99.70 at the time of writing. Market participants will focus their attention on the next data of the US ISM services PMI to obtain more clues about economic perspectives.
President Trump confirmed that he has no intention of replacing the president of the Federal Reserve, Jerome Powell, before his term ends in May 2026. Despite calling Powell “a rigid total,” Trump reiterated his opinion that interest rates should eventually be cut.
In the labor front, the Non -Agricultural Payroll (NFP) report of April surprised, with 177,000 jobs added to the expectations of 130,000. This followed a revised increase of 185,000 in March. The unemployment rate remained stable at 4.2%, while the average earnings per hour grew by 3.8% year -on -year, in line with the previous month.
Meanwhile, the Canadian dollar (CAD) found support with other G10 currencies amid the decrease in concerns about the recession. Canada’s GDP showed modest growth in March, despite the fall in raw material prices and fears around a possible commercial dispute with the US. Resilience in economic data has helped strengthen the feeling towards 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.
