- The USD/CAD has about 1.3650 in the early European session of Monday.
- Low crude oil prices weigh on commodity-linked Loni and serve as a tailwind for the pair.
- The traders waited for the FOMC minutes for fresh impatts on Wednesday.
The USD/CAD pair on Monday increases the rally to 1.3650 during the early European trading hours, which is due to a fall in oil prices. Meanwhile, traders will closely monitor the headlines related to any trade in the countdown of US President Donald Trump’s tariff deadline. On Wednesday, the Federal Open Market Committee (FOMC) will be in the headlines.
The Trump administration is pressurizing business partners to reach new agreements by Wednesday’s deadline. Letters will be sent on Monday, warning nations that high tariffs can be imposed on 1 August. Tariff uncertainty can weigh risk-sensitive assets such as Canadian Dollar (CAD) and create a tailwind for the pair.
The US June Nonform Panels (NFP) released on Thursday reduced the possibility of monetary housing near the US Federal Reserve (Fed). This report has provided some support to Greenback against CAD. According to the CME Fedwatch Tool, the possibility of a decrease in July is decreasing from 25% to 5%.
Meanwhile, after the organization of petroleum exporting countries and colleagues (OPEC+), the decline in crude oil prices agreed to increase a large-to-intake production in August, weighing on commodity-linked Loni. It is worth noting that Canada is the largest oil exporter to the US, and low crude oil prices have a negative impact on the CAD price.
Traders will keep an eye on the release of FOMC minutes on Wednesday, as it can inform how Fed officials see the American economy. Any comment from Fed Policy makers may be reverse for USD against Loni.
Canadian Dollar FAQ
Bank of Canada (BOC), the major factor running Canadian dollars (CAD), is the level of the price of the health, inflation and business balance of Canada, the biggest exports of Canada, the health of the health vs. Canada’s export vs. Other factors include market sentiments-Investors are taking more risky assets (risk-per) or demanding safe-description (risk-closer)-with the risk of risk-CAD-positive. As its largest trading partner, the health of the US economy is also an important factor affecting Canadian dollars.
Bank of Canada (BOC) has a significant impact by determining the level of interest rates on Canadian dollars that banks can lend to each other. This affects the level of interest rates for all. The main goal of BOC is to maintain inflation at 1-3% by adjusting the interest rates up or down. The relatively higher interest rates for CAD are positive. Bank of Canada can also use quantitative spontaneity and tightening to affect the credit position with former CAD-negative and subsequent CAD-positive.
The price of oil is a major factor affecting the value of Canadian dollar. Petroleum is Canada’s largest export, so the price of oil has immediate effect on the CAD price. Generally, the CAD also increases if the price of oil increases, as the total demand for currency increases. If the price of oil falls, it is the opposite case. High oil prices are also as a result of the greater possibility of a positive business balance, which is also the support of the CAD.
While inflation was always traditionally considered as a negative factor for a currency because it reduces the value of money, the opposite has actually been a case in modern times with a discount of cross -border capital controls. High inflation motivates central banks to put in interest rates that attracts more capital flow from global investors who are looking for an attractive place to keep their money. This increases the demand for local currency, which is Canadian dollars in the case of Canada.
Macroeconomic data releases the health of the economy and can affect Canadian dollars. Indicators like GDP, manufacturing and services PMI, employment and consumer spirit survey can all affect the direction of CAD. A strong economy is good for Canadian dollars. Not only does it attract more foreign investment, but it can encourage the bank of Canada to keep interest rates, leading to a strong currency. If the economic data is weak, however, CAD is likely to fall.
