- USD/CAD publishes modest profits around 1.3665 in the Wednesday early Asian session.
- Trump said he would impose a 50% tariff on copper imports.
- Investors are preparing for FOMC a few minutes later on Wednesday.
The USD/CAD pair trads with subtle profits near 1.3665 during the early Asian session on Wednesday. The Canadian dollar (CAD) softens against Greenback after US President Donald Trump raised concerns after tariffs towards Japan and South Korea. The release of Fomc minutes will pass on Wednesday.
Trump said that on Tuesday he would announce a 50% tariff for imported copper and suggested that more steep fees specific to the sector were coming. In addition, the US President also said that he would soon announce the tariffs “at a very, very high rate, just like 200%” in the field of pharmaceutical import.
The US tariff uncertainty and potential modern tariffs for copper imports weigh on Loon, because Canada is the main producer of copper. The country has already been hit by powerful American tariffs for cars, steel and aluminum, but avoided sweeping American duties imposed in April. “There are some steam from Loon (coming), mainly driven by risk aversion, because these tariffs basically returned to the top place,” said Rahim Madhavji, president of Knightsbridgefx.com.
Nevertheless, the Canadian Prime Minister Mark Carney and Trump were to achieve the form of a trade agreement until July 21. Any positive changes regarding a trade agreement in the USA-CANDADA may facilitate limit CAD losses.
Protocols from the June Federal Reserve Meeting may include tips on how Federal Reserve Officials (FED) perceive the American economy and interest rate path. All Dovish comments from Fed decision makers could drag Greenback lower against CAD.
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 safe and sound 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 exploit 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 state-of-the-art 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 powerful 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 feeble, the CAD will probably fall.
