- The USD/CAD weakens about 1,4255 in the American session on Tuesday afternoon.
- Trump said there is no pause in tariffs, but is open to negotiations.
- Investors expect the publication of FOMC minutes later on Wednesday.
The USD/Cad down to around 1,4255 during the American session on Tuesday afternoon. The Canadian dollar (CAD) is strengthened against the US dollar as investors weigh the perspective of global negotiations over US commercial tariffs. The FAR minutes will be at the center of attention later on Wednesday. In addition, the president of the Federal Reserve (Fed), Thomas Barkin, is scheduled to speak.
The US Customs and Border Protection Office declared on Tuesday that it is prepared to start collecting specific tariffs by country to 86 US commercial partners Trump said that a pause was not considered in its plan to implement additional tariffs broad to dozens of countries despite the contact of commercial partners who seek to avoid taxes, but it would insinuate that it would be open to some negotiations.
The minimum 10% tariff of Trump over all imports to the US was introduced last week. He had also previously imposed 25% tariffs on goods in Mexico and Canada and a 10% tariff on Canadian energy imports. However, he then announced some exemptions and delays. The decrease in commercial tension fears between the US and Canada provides some support for CAD.
Meanwhile, a fall in crude oil prices could exert some sale pressure on the Canadian dollar linked to raw materials. It is worth noting that Canada is the largest oil exporter to the US, and the lowest prices of crude oil tend to have a negative impact on the value of the CAD.
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.
