- The USD / CAD is weakening while the Fed's beige beige book highlights the potential negative impact of prospects on economic prospects.
- The US dollar is also losing ground after the PMI composite flash highlighted a slowdown in global commercial activity.
- President Trump suggested that the 25% tariff on Canadian automotive imports to the United States could be raised.
The USD / CAD edges drop approximately 1.3870 during the Asian session on Thursday, after climbing approximately 0.50% the day before. The pair is under pressure while the US dollar (USD) weakens following the April beige book of the Federal Reserve, which highlighted the deterioration of economic conditions.
The report has highlighted increasing concerns concerning prices, which have had a negative impact on economic prospects in several American regions. Consumer spending seemed unequal and labor market conditions have softened, many districts noting stagnant or slightly decreasing job.
The Mécredi S&P PMI figures put pressure on the greenback. The PMI composite flash for April fell to 51.2 against 53.5, reporting a slowdown in commercial activity. While the Manufacturer PMI checked slightly at 50.7, the PMI services fell sharply to 51.4 compared to 54.4, reflecting lower demand in the service sector. Chris Williamson of S&P Global noted that the dynamic of growth is discouraged, persistent inflation complicating the policy prospects of the Fed.
However, the USD / CAD pair appreciated Wednesday while the Canadian dollar (CAD) remained under pressure. This came after US President Donald Trump suggested that a 25% rate on Canadian automotive imports to the United States could be increased. According to Reuters, Trump underlined the efforts to conclude an agreement with Canada, aimed at stimulating American automobile production and reducing dependence on foreign vehicles.
Meanwhile, the Canadian dollar (CAD) also has trouble due to the decreased review of the International Monetary Fund (IMF) of Canada's GDP growth forecast at 1.4% of concerns concerning the weakening of domestic demand, moreover, the decision of the Bank of Canada (BOC) to maintain its interest rate of benchmark stable to 2.75% a potential of late, influence uncertainty.
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.
