- The USD/CAD gains support after the hard line statements of the president of the Federal Reserve, Jerome Powell.
- The CME Fedwatch tool suggested that the operators now anticipate the first rate cut in July.
- The CAD, linked to raw materials, could find support in the highest prices of crude oil.
The USD/CAD stops its two days of losses, quoting around 1,3860 during Asian hours. However, market activity is expected to remain contained due to the Good Friday holiday. The US dollar found support in the hard line comments of the president of the Federal Reserve, Jerome Powell, who warned that persistent inflation and a deceleration economy could threaten the dual mandate of the Fed, increasing the risk of stagflation.
The feeling of the market suffered another blow after President Trump criticized the recent statements of the president of the Fed, Powell. However, the CME Fedwatch tool suggested that the operators are now valuing approximately 86 basic points of feature cuts by the end of 2025, with the first early cut in July.
In the Data Front, the US Department of Labor (DOL) reported that initial unemployment applications fell to 215,000 for the week ending on April 12, exceeding the forecasts and falling from a revised 224,000. However, continuous applications increased by 41,000 to 1,885 million for the week ending on April 5.
Usd/CAD torks could be limited, since the Canadian dollar (CAD), linked to raw materials, could find support in the highest prices of crude oil. The oil shot after the US imposed new sanctions on Iranian exports, which generated concerns about a more adjusted global supply. Meanwhile, uncertainty persists on possible US tariffs on key raw materials, including copper, semiconductors, pharmaceutical products and wood.
The Bank of Canada (BOC) warned that an increase in inflation driven by a possible global commercial war of the Trump era could immerse the economy in a “deep recession.” Although he refrained from issuing an updated forecast, Boc delineated two potential scenarios that reflect the uncertainty about the future tariff policy of the US and its impact on Canada’s perspectives.
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.
