- The USD/CAD edges were reduced by 1.4365 in late Wednesday’s US session.
- The US CPI increased at the fastest in February in four months.
- The BOC on Wednesday cut its major interest rate in 25 BPS, citing the ignoring the trade with the US for the decision.
The USD/CAD pair weakens close to 1.4365 during the late US season on Wednesday. Opposite for Greenback, US President Donald Trump and the possibility of American recession may be limited between rapid tariff uncertainty.
In February, US inflation grew at the slowest pace in four months. Data released by labor statistics on Wednesday revealed that the US Consumer Price Index (CPI) increased 0.2% in February after a sharp 0.5% advance in January. This figure was more soft than expected of 0.3%. The core increased 0.2% during the same period, except for CPI, unstable food and energy categories.
The inflation report speculated that the US Federal Reserve (Fe) may soon cut rates compared to earlier. This, in turn, may pull the US dollar (USD) less than the Canadian dollar (CAD) over the near period.
As is widely expected, the Bank of Canada (BOC) on Wednesday decided to cut its major interest rate into 25 basis points (BPS), making it 2.75%. This was the BOC’s seventh consecutive interest rate cut. A step comes only a few hours after US President Donald Trump released a new steel and aluminum tariff against Canada.
BOC Governor TIFF McCalem said during the press conference, “In recent months, the widespread uncertainty created by the frequent changing US tariff hazards has shook trade and consumer confidence.” You Guyen, an economist of RSM Canada, said that uncertainty was damaging Canadian development and another round of tariffs in April could limit BOC options even more. This can put some sales pressure on Loni and help limit the loss of the pair.
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.
