- USD/CAD is coming to nearly 1,4305 in Wednesday’s late US session.
- Trump announced 25% duty on car imports to the United States.
- BOC minutes showed that the central bank would probably have left the rates unchanged if not for customs risks.
USD/CAD paret rebounds to about 1,4305 during the late US session on Wednesday. Concerns about expected US Auto Tariffs and relieved geopolitical tensions raising greenback against the Canadian dollar (CAD). Dealers will keep an eye on the unemployed preliminary unemployed requirement, the final Q4 Grossonic Product (GDP) report, which will be later on Thursday.
Late Wednesday, US President Donald Trump signed an order to implement a 25% duty on autoimport and expanded the global trade war. Trump said the tariffs would take effect on April 2nd and that the United States would start collecting them one day later. This development weighs on Loonia and acts as a wind of the couple, as Canada sends approx. 75% of its exports to the United States, including oil and cars.
The Bank of Canada’s (BOC) latest meeting monitors indicated that fear of trade policy uncertainties “significantly weakened” economic growth in the short term caused BOC to lower its most important interest rate this month despite some politicians arguing that a break was appropriate.
At the end of November, Trump declared to hit Canada and Mexico with 25% duties on imports, but loved in February and March from the implementation. The policies are now ready to take effect on April 2, although the Toronto star reported Wednesday that Canada could be on the lower end of the customs. The Trump Administration’s unpredictability is likely to undermine CAD in the short term.
Canadian frequently asked questions
The most important factors that drive the Canadian dollar (CAD) are the interest rate set by the Bank of Canada (BOC), the price of oil, Canada’s largest export, health in its economy, inflation and trade balance, which is the difference between the value of Canada’s export versus its import. Other factors include market mood-where investors take on more risky assets (risk-on) or seek safely ports (risk-off)-with risk-on CAD-positive. As its biggest trading partner, the health of the US economy is also a key factor affecting the Canadian dollar.
The Bank of Canada (BOC) has a significant impact on the Canadian dollar by setting the level of interest rates that banks can lend to each other. This affects the level of interest rates for everyone. BOC’s main target is to maintain inflation of 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for CAD. The Bank of Canada can also use quantitative easing and tightening to influence the credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of oil is a key factor that affects the value of the Canadian dollar. Petroleum is Canada’s largest export, so the oil price tends to have an immediate impact on the CAD value. Generally, if the oil price rises, CAD also rises as the total demand for the currency rises. The opposite is the case if the price of oil falls. Higher oil prices also tend to result in a greater likelihood of a positive trade balance, which also supports CAD.
While inflation had always traditionally been considered a negative factor for a currency as it lowers the value of money, the opposite has actually been the case in modern times with the easing of cross -border capital control. Higher inflation tends to lead central banks to set up interest rates that attract more capital inflow from global investors seeking a lucrative place to keep their money. This increases the demand for the local currency, which in Canada’s case is the Canadian dollar.
Macroeconomic data releases measures the economy of the economy and may have an impact on the Canadian dollar. Indicators such as GDP, Manufacture and Services PMIs, Employment and Consumer Mood studies can all affect CAD’s direction. A strong economy is good for the Canadian dollar. Not only does it attract more foreign investment, but it can encourage the Bank of Canada to set up interest rates, leading to a stronger currency. However, if financial data is weak, CAD is likely to fall.