- The American dollar is approaching previous falls at 1.3565 as demand for secure atrophy.
- Higher oil prices act as a support for the Canadian dollar.
- Markets are positive that the Trump-Carney meeting can bring some progress in a tariff agreement.
The attempt to recover USD/CAD observed during Monday’s early trade did not find acceptance above 1,3600. The couple withdrew later, weighed by the wide weakness of the American dollar and is approaching eight -month minima at 1.3565.
Greenback opened a moderate weekly with a positive tone and cut some losses, preferred by a significant reversal of oil prices. Benchmark in the USA improved 3% lower on early trade, withdrawing from USD 75.00 to levels just above 71 USD and dragging CAD sensitive to goods with them.
The American dollar loses its land as a secure demand that disappears
However, the couple were not able to extend the profits at the level of 1.3600, with fear of alleviating the conflict of Iran and Israel, which undermined the demand for secure assets. Several countries have been offered mediation in the war, and US President Trump forces rivals to find a contract that contributed to the alleviating of market fears.
On the other hand, the press report published on the weekend revealed that last week an agreement between the USA and China could leave a key issue of occasional land trade. This enlivened the fears of the uncertainty of tariffs, because the clock passes on July 9 without significant progress in the field of commercial transactions.
In Canada, the moderate optimism that the planned meeting of the US President Trump and the Canadian Prime Minister Mark Carney before the G7 summit can aid bring the pages closer to some trade compromise, acts as support for Loon.
Canadian Dollar Faq
The key factors that drive the Canadian dollar (CAD) are the level of interest rates set by Bank of Canada (BOC), oil price, the largest Canada export, economy health, inflation and commercial balance, which is the difference between the value of Canada exports compared to its import. Other factors include market moods-notterlessly from whether investors take more risky assets (risk), or are looking for secure havens (risk)-risk that is positive. As the largest commercial partner, the health of the American economy is also a key factor affecting the Canadian dollar.
Bank of Canada (BOC) has a significant impact on the Canadian dollar, determining the level of interest rates that banks can borrow. This affects the level of interest rates for everyone. The main goal of BOC is to maintain inflation of 1-3% by adjusting interest rates up or down. Relatively higher interest rates are usually positive for CAD. Bank of Canada can also employ quantitative alleviation and tightening to affect credit conditions, with former negative CAD and the second positive.
The price of oil is a key factor affecting the value of the Canadian dollar. Petroleum is the largest Canada export, so the price of oil tends to immediately affect the value of CAD. Basically, if the oil price also increases CAD, as the number of demand for currency increases. Otherwise, the price of oil will drop. Higher oil prices usually cause a greater probability of a positive trade balance, which also supports CAD.
While inflation has always been traditionally considered a negative factor of currency, because it reduces the value of money, on the contrary it was in current times with relaxation of cross -border capital control. Higher inflation tends to run central banks to determine interest rates, which attracts greater capital revenues of global investors looking for a lucrative place to maintain money. This increases the demand for the local currency, which in the Canadian case is the Canadian dollar.
Macroeconomic data release the health of the economy and may affect the Canadian dollar. Indicators such as GDP, PMI production and services, surveys on employment and consumer moods can affect the direction of CAD. A mighty economy is good for the Canadian dollar. It not only attracts more foreign investment, but can encourage Bank Canada to set interest rates, which leads to a stronger currency. However, if economic data is faint, the CAD will probably fall.
