- The USD/CAD is stable around 1,3705 in the first Asian session on Tuesday.
- Tariff threats could weigh on CAD, but the strongest Canadian work data could limit their fall.
- The inflation data of the JUDA IPC of the USA and Canada will be at the Center for Care later on Tuesday.
The USD/CAD pair remains stable around 1,3705 during the first Asian session on Tuesday. The operators largely ignored the new tariffs before the inflation data of the United States Consumer Price Index (IPC) (USA) and Canada on Tuesday.
Last week, US President Donald Trump announced a 35% tariff rate for goods imported from Canada, which will begin on August 1. The new measures are added to existing 50% tariffs on Steel and Canadian aluminum. In addition, Trump also imposed a new 50% tariff on US copper imports, which will begin in the same period. The concerns that US tariffs impact the Canadian economy could undermine CAD, since Canada is an important commercial partner and a significant copper supplier for the US.
On the other hand, the optimistic Canadian employment data of June could boost the Canadian dollar (CAD) against the US dollar. Canada statistics revealed on Friday that the unemployment rate in Canada fell to 6.9% in June from 7.0% in May. This figure was stronger than the 7.1% expected. Meanwhile, the Canadian economy added 83.1k jobs in June compared to 8.8K previously. Economists hoped there would be no changes in employment.
Monetary markets have incorporated almost 84% probability that the Canada Bank maintains the interest rate at the July meeting, according to Reuters. It is anticipated that the BOC will reduce rates in the second half of the year. However, it will be difficult for those responsible for Boc policies drawing a rate of rates, given all economic uncertainty.
Canadian dollar – frequent questions
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.
