- Canada's dollar found higher soil against the embattled greenback.
- A key fed rate call is emerging in Midweek and can drive fresh volatility.
- The joint press conference of Canadian PM Carney with US President Trump has revealed extensive gaps on trade expectations and US clarity.
The Canadian Dollar (CAD) rose against the US Dollar (USD), which sent Loonie to recent highs against the greenback and pushed the CAD up to one-third of a percentage against the USD on Tuesday. The sentiment in the market found a bit of support after a joint meeting between Canada Prime Minister Mark Carney and a frazzled US president (US) Donald Trump, who experienced a great deal of hardship delivering a unique direction of policy.
Despite a rough manifestation from President Trump during a key joint press conference, the upcoming Federal Reserve (FED) rate (FED) on Wednesday was the week's overarching key event as investors await signs of a pivot to a cutting rate from the Fed Policymaker. Canadian economic data also began to soften as a floating economic backward faced with the growing risks of descending acceleration in the face of a combined trade in the US.
Daily Digest Market Movers: The Canada Dollar gets a bid to the wide market weakness of greenback
- The benefit of Canada Dollar's Tuesday pushed the USD/CAD to fresh multi-month lows below 1.3800.
- Seasonal Adaptations to Canada Ivey Purchasing Managers Index (PMI) numbers from April have shown another sharp decline in expectations in business conditions, returning below 48.0 compared to the expected 51.2.
- The Fed is widely expected to maintain interest rates on Wednesday, but investors will claim statements from Fed officials, and Fed chair Jeromy Powell is specific, for any signs of a possible pivot towards cuts on the rate of future.
- The joint conference of the Carney-Trump Press took place as well as the expectations of the markets.
- According to PM Carney, the currently standing USMCA trade agreement is a great 'starting point', but some things about the agreement need to change. According to President Trump, the USMCA does not need to be renegotiated, but may be renegotiated, but best for everyone, but still not enough to protect interests in the US business, at the same time.
Forecasting the Canadian dollar price
As the broad-market greenback seller continues to grind, Canada's dollar continues to find a higher place against the USD. The USD/CAD sank to a fresh seven-month low on Tuesday, tap at 1.3750 for the first time since October of last year.
The momentum remains mainly out of the USD/CAD chart, and geopolitical shifts will be the main driver for relying on the price expected. The pair is still running on the southern part of the 200-day exponential transfer of average (EMA) which is just above 1.4000, and despite a lazy general chart setup, bullish bias is still tilted in favor of Loonie at this time.
Sales -Sun chart of USD/CAD
Canadian Dollar FAQs
The main factors driving the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the largest export of Canada, economic health, inflation and trade balance, which is the difference between the value of Canadian exports compared to its imports. Other factors include market sentiment-whether investors take more risky assets (risk-on) or seeking safe havens (risk-off) — that there is a risk of being positive in the CAD. As its largest trading partner, US economic health is a major factor that influences Canadian dollars.
The Bank of Canada (BOC) has a significant influence on Canada's dollar by setting the level of interest rates that can lend to banks to one another. It influenced the level of interest rates for everyone. The BOC's main purpose is to maintain inflation at 1-3% by adjusting interest rates up or down. The relatively higher interest rate tends to be positive for the CAD. The Bank of Canada can also use easing and tight volume to influence credit conditions, along with the former CAD-negative and the late CAD-positive.
The price of oil is a major factor that affects the value of Canada's dollar. Petroleum is Canada's largest export, so oil prices tend to have an immediate impact on the cost of CAD. Usually, if the oil price rises the CAD is also rising, as the demand for money increases. The opposite is the case when oil prices fall. Higher oil prices tend to result in a greater probability of a positive trading balance, which also supports the CAD.
While inflation is always traditionally thought to be a negative factor for a currency because it lowers the amount of money, the opposite is actually the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to rule over central banks to put interest rates that attract more capital flows from global investors looking for a useful place to maintain their money. This increases demand for local currency, which in the case of Canada is the Canadian dollar.
Macroeconomic data releases economic health and can have an impact on Canada's dollar. Indicators such as GDP, manufacturing and service PMIS, work, and consumer sentiment surveys can influence all CAD directions. A strong economy is good for Canada's dollar. Not only does it attract more foreign investment but it can encourage the Bank of Canada to put interest rates on, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
