- The USD/CAD rises to about 1,3920 after the publication of data from the Canadian labor market.
- The Canadian unemployment rate accelerated at a faster rate than expected, reaching 6.9%.
- Investors expect commercial conversations between the US and China scheduled for the weekend.
The USD/CAD pair moves up to 1,3920 in the American session on Friday after the publication of Canadian labor market data for April. The data showed that the unemployment rate accelerated at a faster rate, reaching 6.9% from the estimates of 6.8% and the reading of March 6.7%, the highest level seen since October 2021.
The increase in the unemployment rate has led to the upward Loonie despite the correction in the US dollar (USD), suggesting a significant weakness in the Canadian dollar (CAD).
The Canadian economy added 7.4k new workers, more than the 2.5K estimates. In March, the workforce was reduced by 32.6k workers. Meanwhile, the average hourly salary, a key measure of salary growth, constantly increased by 3.5% year -on -year.
It is expected that the increase in the unemployment rate will drive the market expectations that the Canada Bank (BOC) needs to resume its monetary expansion cycle, which it paused at the policy meeting last month.
Meanwhile, the US dollar corrects sharply as investors become cautious before commercial conversations between the United States (USA) and China. The secretary of the US Treasury, Scott Besent, and the trade representative, Jamieson Greer, have confirmed that they will meet with their Chinese counterparts in Switzerland on Saturday, with the aim of disparaging the commercial war.
The US dollar index (DXY), which tracks the value of the dollar against six main currencies, goes from a maximum of almost a month of 100.85 previously recorded in the day to about 100.30, at the time of publication.
Before the meeting between the US and China, President Donald Trump has indicated that pekin tariffs could be reduced to 80% through a publication in Truth.social. “80% tariff on China seems correct! It depends on Scott Besent,” Trump said.
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.
