- The Canadian dollar remained at family levels on Tuesday.
- The Bank of Canada and the Federal Reserve are scheduled for this week.
- The Loonie’s rates differential is ready to expand even more, limiting the bullish probabilities.
The Canadian dollar (CAD) remained at family levels on Tuesday, keeping afloat while the Loonie operators prepare for waiting for the double key presentation of this week’s central banks. It is widely expected that the Canada Bank (BOC) cuts interest rates once again on Wednesday, while the Federal Reserve (FED) will remain unchanged in interest rates during most of the first half of the year.
The next trim of the Boc rates will see the fees differential of the Canadian dollar against the US dollar to extend even more, exerting downward pressure on the loonie. With the USD/CAD already testing maximums of several years, greater downward pressure on the Loonie will only get things worse.
Daily Markets Summary: Tariff threats dominate the owners while operators expect the Fed and Boc
- Boc is expected to reduce interest rates for another 25 bp on Wednesday.
- The Fed will remain unchanged in rates while central bankers evaluate short -term results.
- The president of the United States, Donald Trump, reiterated his willingness to use general tariffs to try to force the production of other countries to the US.
- The possible inflationary pressure of the tariffs could, in a counterintuitive way, make it difficult for the Fed to cut the rates, despite the fact that President Trump declared his intention to “ask” the Fed to lower the rates.
Prognosis of the price of the Canadian dollar
The USD/COR continues to move laterally, revolving around 1,4400. With the limited price action in the average range of a side channel, the technical indicators are returning to their medians.
The offers are limited between 1,4500 and 1,4300, and a rapid break in any direction could initiate a new firm stage of a trend.
USD/CAD DAILY GRAPH
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Canada Bank (BOC), the price of oil, the main export product of Canada, the health of its economy, Inflation and trade balance, which is the difference between the value of Canadian exports and that of their 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.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
