- USD/CAD rises sharply to near 1.4430, with investors remaining cautious as Trump is set to return to the White House on Monday.
- The prospects for the Canadian economy have weakened on the assumption that Trump will increase tariffs by 25%.
- Weak core CPI data for December forced traders to increase dovish bets on the Fed.
The USD/CAD pair rises to around 1.4430 in the North American session on Friday. The Loonie pair strengthens as the Canadian Dollar (CAD) performs weakly, with investors becoming cautious as United States (US) President-elect Donald Trump is scheduled to be inaugurated on Monday.
Canadian Dollar PRICE Today
The table below shows the percentage change of the Canadian Dollar (CAD) against major currencies today. Canadian dollar was the strongest currency against the New Zealand dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | 0.40% | 0.25% | 0.22% | 0.43% | 0.43% | 0.16% | |
| EUR | -0.06% | 0.33% | 0.19% | 0.15% | 0.36% | 0.37% | 0.09% | |
| GBP | -0.40% | -0.33% | -0.15% | -0.18% | 0.03% | 0.03% | -0.24% | |
| JPY | -0.25% | -0.19% | 0.15% | -0.03% | 0.17% | 0.18% | -0.10% | |
| CAD | -0.22% | -0.15% | 0.18% | 0.03% | 0.20% | 0.22% | -0.06% | |
| AUD | -0.43% | -0.36% | -0.03% | -0.17% | -0.20% | 0.00% | -0.27% | |
| NZD | -0.43% | -0.37% | -0.03% | -0.18% | -0.22% | -0.01% | -0.28% | |
| CHF | -0.16% | -0.09% | 0.24% | 0.10% | 0.06% | 0.27% | 0.28% |
The heat map shows percentage changes for major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will represent CAD (base)/USD (quote).
Investors expect Trump’s main job to be releasing a new tariff plan, a scenario that could lead to a global trade war. The Canadian economy is expected to face a 2% increase in tariffs on its exports to the US, as Trump mentioned earlier.
Market participants hope that large U.S. tariffs on Canada could hurt its economic prospects. “If Canada is hit by large tariffs and does not retaliate, then the disinflationary effects would likely prompt considerably more easing by the Bank of Canada (BoC),” Derek Holt, an economist at Scotiabank said.
The BoC was one of the major central banks that aggressively eased tightening policy. According to a Reuters poll from January 10-16, the BoC is almost certain to cut interest rates by 25 basis points (bps) to 3%.
Meanwhile, the US dollar (USD) rises as investors digest a possible acceleration in bets from traders who support more than one interest rate cut by the Federal Reserve (Fed). The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, rises to near 109.15.
Dovish bets on the Fed increased after the release of the US Consumer Price Index (CPI) report for December, which showed annual core inflation surprisingly slowed.
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
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.
