- USD/CAD increases slightly, while the USD ratio gains almost 0.5% above 100.00.
- The American Dollar denies despite the American production of ISM PMI contracts at faster pace in April.
- BOC believes that the impact of previous interest rates has not yet been transferred to the economy.
Couple USD/CAD edges higher up to almost 1.3820 at the North American trade on Thursday. The Liono pair moves a little higher, despite the US dollar (USD) attracted significant offers after the Data Managing Managing Managing (PMI) of the United States (USA).
The American dollar index (DXY) increased by almost 0.5% above 100.00, despite the fact that the agency said that the activities in the production sector are still falling at a faster pace. Production PMI reached 48.7, lower than in March reading 49.0, but higher than 48.0 estimates. The number below the threshold of 50.0 indicates a business of business.
The perspectives of the American dollar are already gloomy among uncertainty about trade relations between the USA and China. Comments from the White House indicated that both nations have not yet started professional discussions.
Jamiesson Greer, a representative of the US trade, in an interview with Fox News on Wednesday, that professional discussions with Beijing have not yet begun from the time of applying mutual tariffs, said South China Morning Post (SCMP)
In the Canadian region, investors are looking for fresh tips on whether Bank of Canada (BOC) will again begin to reduce interest rates from a politics meeting in June. BOC minutes at the April meeting showed on Wednesday that the central bank left interest rates unchanged at the level of 2.75% among uncertainty about economic perspectives in the face of additional tariffs announced by US President Donald Trump on April 2. It was the first time Boc kept the loan feet after stopping them seven times in the row.
Minutes BOC also indicated that decision -makers still believe that the impact of previous rates of rates is not yet transferred to the economy, and therefore facilitating the policy at this stage could have been a “premature” movement.
In minutes it was also found that the central bank would remain elastic towards the adaptation of monetary policy, as long as the “medium and long -term inflation expectations remain anchored,” Reuters said.
FAQ in American dollars
The American dollar (USD) is the official currency of the United States of America and the “de facto” currency of a significant number of other countries where it is in circulation with local notes. It is most often a commercial currency in the world, which is over 88% of all global currency turnover, i.e. an average of $ 6.6 trillion of transactions per day, according to the data from 2022. After the Second World War, USD took over from the British pound as the reserve currency of the world. For most of its history, the American dollar was supported by gold, up to the Bretton Woods agreement in 1971, when the golden standard disappeared.
The most vital single factor affecting the value of the American dollar is the monetary policy, which is shaped by the Federal Reserve (FED). The Fed has two seats: achieving price stability (control inflation) and supporting full employment. Its main tool to achieve these two goals is to adjust interest rates. When the prices rise too quickly and inflation is above 2% of the Fed target, the FED will escalate the rates, which helps USD values. When inflation drops below 2% or the unemployment rate is too high, the Fed may reduce interest rates that are weighing in the green area.
In extreme situations, the Federal Reserve can also print more dollars and introduce quantitative alleviation (QE). QE is a process in which the Fed significantly increases the credit flow in the detained financial system. It is a non -standard policy measure used in the event of a loan parched, because the banks will not borrow (for fear of the contractor). This is the last last, when just lowering interest rates is unlikely to achieve the necessary result. The weapon of choosing the Fed was a FED weapon to combat the credit crisis, which took place during the great financial crisis in 2008. This includes FED printing more dollars and using them to buy US government bonds mainly from financial institutions. QE usually leads to a weaker American dollar.
Quantitative twist (QT) is the opposite process in which the federal reserve stops buying bonds from financial institutions and will not reinvest from the bonds that it has in up-to-date purchases. This is usually positive for the American dollar.
