- The US dollar cuts some losses to a slight improvement in feeling.
- The US manufacturing PMI adds evidence of the negative impact of tariffs on the sector.
- The hopes of an aggressive Boc keep the CAD rising.
The US dollar is quoting in a somewhat stronger tone on Tuesday, favored by an improved market feeling, which has helped the USD/CAD bouncing from minimums of the year below 1,3700 and returning to the area of ​​1,3730 at the time of writing.
However, the broader trend remains bassist, with a weak speculative demand for the US dollar, due to concerns about the impact of Trump’s tariffs on the US economy and imminent fears on US fiscal health.
The dollar needs solid data from the US to confirm its recovery
The figures of the USM manufacturing PMI of the United States published on Monday confirmed that commercial uncertainty is affecting the sector. The PMI decreased for the third consecutive time, against the expectations of a slight improvement. Employment subscripts and new orders rose, with prices in descent and increasing delivery times, and growing concerns about possible escases in some products.
The figures added pressure to a US dollar already weak, but the Greenback managed to recover during the Asian session, with a market feeling improving something.
In Canada, the solid figures of the Gross Domestic Product seen last week have cemented the expectations that the Canada Bank will maintain interest rates without changes, which limits the falls of the Canadian dollar.
Today’s approach will be in the publication of US factory orders, of particular interest after the weak manufacturing data on Monday, and US Jolts work offers. The US dollar needs positive surprises to extend its recovery.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
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.
