- The USD/CAD softens about 1.4290 in the late US season of Monday.
- US retail sales increased more than expected in February, weight on US dollars.
- Crude oil prices increase more due to geopolitical risks, supporting the CAD associated with commodity.
The USD/CAD pair remained at a defensive near 1.4290 during late US session on Monday. US Dollar (USD) weakens US President Donald Trump’s conservationist trade policies as an apprehension of economic recession, cautioning investors to greenback. Canada’s February Consumer Price Index (CPI) inflation report will be in the news on Tuesday.
US retail sales increased less than expected in February, increasing concerns about the recession in consumer spending. The data released by the US Census Bureau on Monday revealed that retail sales in the United States took place in February to a 0.2% mother to -1.2% (revised from -0.9%). The figure was weaker than the market expectation for an increase of 0.7%. On an annual basis, retail sales came to 3.1%compared to 3.9%(modified by 4.2%) in January.
Trump’s tariffs have increased the high levels of uncertainty among investors, discouraging the tariff threats of Trump. This, in turn, reduces USD compared to Canadian Dollar (CAD). Investors will monitor the US building permits, housing starting and industrial production data, which are going to be later on Tuesday. If the report shows a strong result, it can help limit the loss of USD in the near period.
The increase in crude oil prices amids growing geopolitical stresses in the Middle East provides some support to commodity-linked Loni. It is worth noting that Canada is the largest oil exporter for the United States (US), and high crude oil prices have a positive impact on the CAD price.
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.
