- The USD/CAD wins as the US dollar is strengthened after Treasury Secretary Scott Besent insinuated a possible unwritten in commercial tensions.
- The White House also pointed out advances in trade negotiations aimed at relieving the wide tariffs introduced earlier this month.
- The body found support in increasing crude oil prices, driven by sanctions to Iran and a decrease in US reserves.
The USD/CAD progresses, bouncing two consecutive loss sessions, and is quoted about 1,3830 during Wednesday’s Asian hours. The US dollar (USD) found support after the comments of the Secretary of the US Treasury Scott Besent, who described the ongoing tariff dispute as “unsustainable”, insinuating a possible unworthy.
On Tuesday, the White House announced advances in trade negotiations aimed at reducing the wide tariffs imposed earlier this month. The press secretary Karoline Leavitt declared that 18 countries have already submitted commercial proposals, and President Trump’s team will meet this week with representatives of 34 nations to explore possible agreements.
However, the recovery of the USD/CAD pair can be limited, since the Canadian dollar (CAD), a currency linked to raw materials, obtains support for the increase in prices of crude oil. As the largest oil exporter to the United States (USA), Canada benefits from stronger oil markets.
The crude prices continued to rise in the midst of new sanctions to Iran, the decrease in crude oil reserves in the US and a more moderate tone of President Trump on the Federal Reserve. The markets also responded positively after Trump soften their position on the president of the FED, Jerome Powell, and suggested a possible tariff relief for China.
Investors anticipate that the Bank of Canada (Boc) will maintain a neutral position on its monetary policy perspective. The Central Bank left its reference interest rate without changes in 2.75% last week. The attention now focuses on the retail sales data of Canada in February, scheduled for publication on Friday, which could offer more information about the economic perspective.
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its 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.
