USD/CAD remains in positive territory above 1.4350 ahead of US PMI release.

  • USD/CAD posts modest gains around 1.4375 in the early Asian session on Friday.
  • Trump said he wanted the Fed to lower interest rates immediately.
  • Canada’s retail sales were flat in November, weaker than expected.

The USD/CAD pair is trading with slight gains near 1.4375 during the early Asian session on Friday. Investors are hoping for more clarity on US President Donald Trump’s tariff announcements. Later on Friday, S&P Global’s preliminary US manufacturing and services PMIs for January will be in the spotlight.

Late Thursday, Trump said he wants the US Federal Reserve (Fed) to cut interest rates “immediately,” adding that he understands monetary policy better than those charged with setting it. Trump’s comments came ahead of the Fed’s monetary policy meeting scheduled for Jan. 28-29, with expectations that the U.S. central bank will keep rates steady.

“I think Trump’s comments at the World Economic Forum today helped the euro-dollar recover and put some pressure on the (US) dollar more broadly,” said Silver Gold Bull Erik Bregar, director of risk management at FX and precious metals on Silver Gold Bull.

On the Loonie front, Canada’s retail sales were flat on a monthly basis in November from 0.6% previously, Statistics Canada reported Thursday. This reading was weaker than the 0.2% expected.

Meanwhile, a drop in crude oil prices could put some selling pressure on the commodity-linked Canadian Dollar (CAD) and limit the pair’s decline. Canada is the largest exporter of oil to the US, and lower crude oil prices tend to have a negative impact on the value of the CAD.

Canadian Dollar FAQs


The key factors that determine the price of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of oil, Canada’s main export product, the health of its economy, inflation and the trade balance, which is the difference between the value of Canadian exports and its imports. Other factors are market confidence, that is, whether investors bet on riskier assets (risk-on) or look for safe assets (risk-off), with the risk-on being positive for the CAD. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian dollar.


The Bank of Canada (BoC) exerts significant influence over the Canadian Dollar by setting the level of interest rates that banks can lend to each other. This influences the level of interest rates for everyone. The BoC’s main objective is to keep inflation between 1% and 3% by adjusting interest rates up or down. Relatively high interest rates are usually positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former being negative for the CAD and the latter being positive for the CAD.


The price of oil is a key factor influencing the value of the Canadian Dollar. Oil is Canada’s largest export, 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, as aggregate demand for the currency increases. The opposite occurs if the price of oil falls. Higher oil prices also tend to lead to a higher probability of a positive trade balance, which also supports the CAD.


Although inflation has traditionally always been considered a negative factor for a currency, as it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross-border capital controls. Higher inflation often leads central banks to raise interest rates, attracting more capital inflows from global investors looking for a lucrative place to store their money. This increases the demand for the local currency, which in the case of Canada is the Canadian Dollar.


The published macroeconomic data measures the health of the economy and may have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the direction of the CAD. A strong economy is good for the Canadian dollar. Not only does it attract more foreign investment, but it may encourage the Bank of Canada to raise interest rates, resulting in a stronger currency. However, if economic data is weak, the CAD is likely to fall.

Source: Fx Street

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