- The USD/CAD attracts new sales on Thursday and is pressed for a combination of factors.
- The USD bulls remain defensive despite the Fed hard line pause on Wednesday.
- The renewed purchase around oil prices benefits CAD and weighs on the currency pair.
The USD/CAD fails to capitalize on the modest recovery movement of the previous day since the neighborhood of the minimum of the year and meets new sales during the Asian session on Thursday. However, cash prices remain confined in a range of several weeks and currently quote around the 1,3815 region, with a 0.15% drop in the day.
The US dollar (USD) continues with its struggle to attract significant buyers in the midst of the growing economic uncertainty led by the rapid change of posture of US President Donald Trump about commercial policies. In fact, Trump said he is not in a hurry to sign any agreement and added that he is not willing to reduce the tariffs of 145% imposed on China to promote commercial negotiations. This, to a large extent, eclipses the Federal Reserve Hard Line Pause (FED) on Wednesday, which keeps the USD bulls on the defensive and weighs on the USD/CAD torque.
Meanwhile, crude oil prices recover positive traction after night setback from a maximum of a week and benefit the CAD linked to raw materials. Apart from this, the hopes of a new commercial agreement between the US and Canada benefit the Canadian dollar (CAD) and exert some pressure on the USD/CAD pair. However, Opec +’s decision to accelerate the increase in production fueled over -supply fears. This, together with the concerns about demand due to the hopeful hopes of a rapid resolution of the commercial war between the US and China, should limit any significant increase in crude oil prices.
This, in turn, makes it prudent to expect a strong sales monitoring before confirming a new break for the USD/CAD torque and position itself for an extension of the recently pronounced sliding slide from a maximum of more than two decades reached in February. The operators now expect the publication of the weekly data of initial applications for US unemployment subsidy to obtain some impetus later during the early American session. Apart from this, the dynamics of oil prices should help generate short -term trading opportunities before the Canadian employment report on Friday.
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.
