- The USD/CAD gains support in the middle of a greater risk aversion before the Trump scheduled tariffs for April 2.
- The Canadian dollar was strengthened since Trump suggested that “many” countries could receive exemptions.
- The US S&P Services PMI jumped to a maximum of three months of 54.3 in March, rising from 51.0 in February.
The USD/CAD is quoted around 1,4320 during the Asian session on Tuesday, recovering after losses in the previous session. The risk -sensitive par is winning as the operators remain cautious before the program of programmed tariffs of the US president, Donald Trump, for April 2.
However, the Canadian dollar (CAD) found support since Trump hinted that “many” countries could receive exemptions, although the details remain uncertain. Investors welcomed the signs that the US could adopt a more measured and specific approach towards tariffs, relieving concerns about possible interruptions to Canadian companies.
Meanwhile, the US dollar faced pressure due to the growing fears of an economic deceleration, driven by concerns about Trump’s commercial policies. However, this was compensated by the hard line comments of the president of the FED, Jerome Powell, last week. Powell declared: “The conditions of the labor market are solid, and inflation has approached our long -term objective, although it is still somewhat high.”
In the Data Front, the PMI composed of the US Global S&P rose to 53.5 in March, bouncing from the minimum of 10 months of 51.6 in February and marking the strongest expansion since December 2024. This growth was mainly driven by the service sector, which saw a strong rebound in business activity.
The US S&P Services PMIs shot at a maximum of three months of 54.3 in March, going up from 51.0 in February and exceeding the expectations of the market of 50.8. Meanwhile, the manufacturing PMI fell to 49.8 from 52.7, being below the 51.8 forecast. This fall followed the strongest manufacturing growth in February in almost three years.
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.
