USD / CADE stations nearly 1,3,950 because the US dollar receives support from commercial optimism
- The USD / CAD may be assessed due to optimism concerning progress in American-Chinese trade negotiations held this weekend in Switzerland.
- The Secretary in the United States of the Treasury, Bessent, described discussions as a positive development towards the narrowing of the commercial imbalance of $ 400 billion.
- The CAD remains under pressure, increased by mixed data on the labor market and the evolution of expectations concerning the prospects for BOC policy.
The USD / CAD tries to hold its position for the fourth consecutive session, oscillating approximately 1,3940 during the Asian negotiation hours on Monday. The pair remains supported as the US dollar (USD) is gaining strength after progress reported in American-Chinese commercial talks this weekend in Switzerland.
US Treasury Secretary, Scott Bessent, described the two -day talks in Geneva with Chinese officials as “productive”, with additional details expected during a Monday morning briefing. Currently, China is subject to American prices of 145%, while Beijing imposed 125% tariffs on American exports. The Secretary of Commerce, Howard Lungick, noted that the reference rate of 10% on other countries will probably remain unchanged “in the predictable future”.
Although recession problems persist, recent data suggest that the American economy is more likely to go to a slowdown rather than a complete contraction. There are also no signs of accelerating inflation, IPC and PCI measures decreasing in March.
However, officials of the Federal Reserve (Fed) expressed concerns about potential stagflation. Governor Michael Barr warned that the increase in prices could disrupt supply chains, resulting in higher inflation, lower growth and an increase in unemployment. Consequently, the feeling of investors remains cautious in the risk of aggravating trade tensions.
Meanwhile, the Canadian dollar (CAD) is under pressure due to mixed data on the job market and displacement expectations around the political position of the Canada Bank (BOC). Despite a better than expected employment gain of 7,400 in April, the unemployment rate climbed to 6.9% – the highest since November – Light weaknesses in the tariff sectors such as manufacturing.
Canadian dollar FAQ
The key factors at the origin of the Canadian dollar (CAD) are the level of interest rate set by the Bank of Canada (BOC), the price of oil, the largest export in Canada, the health of its economy, inflation and trade balance, which is the difference between the value of exports of Canada compared to its imports. Other factors include the feeling of the market – that investors have more risky assets (risk) or are looking for safety havens (risk) – with the risk for the positive CAD. As the most important trading partner, the health of the American economy is also a key factor influencing the Canadian dollar.
The Bank of Canada (BOC) has a significant influence on the Canadian dollar by fixing the level of interest rate that banks can lend each other. This influences the level of interest rate for everyone. The main objective of the BOC is to maintain inflation to 1 to 3% by adjusting increased or declining interest rates. Relatively higher interest rates tend to be positive for CAD. The Bank of Canada can also use a quantitative softening and tightening to influence credit conditions, with the old cad-negative and the last positive frame.
The price of oil is a key factor with an impact on 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 CAD value. Generally, if the price of oil increases, the CAD also increases, because the overall demand for money increases. The reverse is the case if the price of oil decreases. The higher oil prices also tend to lead to a greater probability of a positive trade balance, which also supports CAD.
Although inflation has always been considered a negative factor for a currency because it reduces the value of money, the reverse was in fact the case in modern times with the relaxation of cross -border capital controls. A higher inflation tends to lead central banks to set up interest rates that attract more capital entries from global investors looking for a lucrative place to keep their money. This increases demand for local currency, which in the case of Canada is the Canadian dollar.
Macroeconomic data versions assess the health of the economy and may have an impact on the Canadian dollar. Indicators such as GDP, Manufacturing and PMIS services, employment and surveys on consumer feelings can all influence CAD management. A strong saving is good for the Canadian dollar. Not only does it attract more foreign investment, but it can encourage the Bank of Canada to install interest rates, which leads to a stronger currency. If the economic data is low, however, CAD is likely to decrease.
