- The USD/CA begins the new week with a positive note, although it lacks a strong tracking.
- The increase in geopolitical tensions benefits the Usd secure refuge and provides support to the main torque.
- Crude oil bullish prices benefit CAD and limit cash prices before global PMIs.
The USD/CAD pair opens with a modest upward hole at the beginning of a new week and plays a new monthly maximum, levels beyond mid -1,3700 during the Asian session. However, cash prices lack bullish conviction in the midst of a combination of divergent forces, which justifies caution before positioning itself for an extension of the good recovery last week since the minimum of the year.
The feeling of global risk suffered a blow to the US attack on Iran’s nuclear facilities on Sunday, which increases the risk of a greater escalation of the conflict in the Middle East. This, in turn, drives some flows to the safe shelter in the US dollar (USD) and turns out to be a key factor that acts as a tail wind for the USD/CAD torque. However, the growing acceptance that the Federal Reserve (FED) will resume its cycle of feat cuts in September maintains a limit on any additional gain for the USD.
Meanwhile, concerns that a broader conflict in the Middle East interrupts supplies raised crude oil prices to more than five months and benefit the CAD linked to raw materials. In addition, the hopes that the US and Canada can soon have a commercial agreement, together with the diminished probabilities of more rate cuts by the Bank of Canada (BOC) in the midst of a re-beaten of internal inflation, support the Canadian dollar (CAD). This could contribute even more to limit the upstream/CAD rise.
The operators now expect the publication of the global preliminary PMIs, which, together with the geopolitical developments, will boost the feeling of risk and influence the dollar. Apart from this, oil price dynamics will be observed to take advantage of short -term trading opportunities around the USD/CAD torque. Market attention will then focus on the latest inflation figures of the Canadian consumer and the two -day testimony of the president of the FED, Jerome Powell, which will begin on Tuesday.
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.
