Select Language

USD/CAD hovers near 1.3900, three-month highs amid lower crude Oil prices

Breaking news

USD/CAD hovers near 1.3900, three-month highs amid lower crude Oil prices

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2024.10.29 12:05
USD/CAD hovers near 1.3900, three-month highs amid lower crude Oil prices

update 2024.10.29 12:05

  • USD/CAD receives support as the commodity-linked CAD struggles due to lower Oil prices.
  • Crude Oil prices plunge due to easing fears of a potential all-out war in the Middle East.
  • CME FedWatch Tool suggests a 95.8% probability of a 25-basis-point rate cut in November.

USD/CAD holds its position near 1.3890 during the Asian trading hours on Tuesday, close to its three-month high of 1.3908, recorded on Monday. The commodity-linked Canadian Dollar (CAD) faces challenges due to lower Oil prices as Canada is the largest crude exporter to the United States (US).

West Texas Intermediate (WTI) oil price trades around $67.50 at the time of writing. Oil prices have fallen sharply as the limited military operations have alleviated fears of a potential all-out war in the Middle East. Iran's Foreign Ministry spokesperson, Esmaeil Baghaei, indicated the possibility of using "all available tools" to respond to Israel's recent attacks on military targets in Iran, according to Reuters.

On Monday, Governor Tiff Macklem provided further details on the Bank of Canada's (BoC) decision to implement an aggressive interest rate cut last week, explaining that the easing is reasonable given the aggressive hikes in borrowing costs aimed at controlling inflation in recent years. Macklem also noted that the central bank will need to "discover" the neutral rate that neither stimulates nor restricts economic activity, according to Bloomberg News.

The US Dollar (USD) strengthens as positive economic data from last week suggests ongoing resilience in the US economy. This bolsters expectations for nominal interest rate cuts by the Federal Reserve (Fed) in November. The CME FedWatch Tool indicates a 95.8% probability of a 25-basis-point rate cut in November, with no anticipation of a larger 50-basis-point reduction.

Additionally, the US Dollar receives support amid higher US bond yields. This increase is driven by market sentiment increasingly favoring Former President Donald Trump in the upcoming US presidential election and expectations that the Fed may adopt a more cautious stance on future rate cuts. According to polling site FiveThirtyEight, Trump's possibility of winning the US election has increased to 52% compared to 48% for Vice President Kamala Harris.

Canadian Dollar FAQs

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada's largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada's exports versus its imports. Other factors include market sentiment - whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) - with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada's biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. 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 is also supportive of the CAD.

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada's case is the Canadian Dollar.

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.


Date

Created

 : 2024.10.29

Update

Last updated

 : 2024.10.29

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.

Was this article helpful?

We hope you find this article useful. Any comments or suggestions will be greatly appreciated.  
We are also looking for writers with extensive experience in forex and crypto to join us.

please contact us at [email protected].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

Mexican Peso plummets as Trump closes in on victory

The Mexican Peso (MXN) plummets in its most-heavily traded pairs on Wednesday, especially versus the US Dollar (USD), against which it is down over two percent after results from the US presidential election show Republican nominee Donald Trump extremely close to victory.
New
update2024.11.06 17:35

Not only Harris lost, the euro lost as well - Commerzbank

Not only did the US dollar make significant gains last night.
New
update2024.11.06 17:27

GBP/JPY rises above 198.00 as traders expect BoE to deliver a nominal rate cut in November

GBP/JPY extends its gains for the second successive session, trading around 198.30 during the European hours on Wednesday.
New
update2024.11.06 17:18

China: Looking beyond the NPC meetings - Standard Chartered

With 2024 growth risk ebbing, we think the policy focus has shifted to 2025.
New
update2024.11.06 17:16

Breaking: Trump inches closer to presidency after winning decisive Pennsylvania swing state

Former US president Donald Trump is about to officially win the 2024 US presidential election.
New
update2024.11.06 16:48

Trump speech: Thank the American people for honor of being elected

Donald Trump delivers a speech at the Palm Beach Convention Center after he is widely projected to win the presidency.
New
update2024.11.06 16:41

NZD/USD Price Forecast: Falls toward descending channel's lower boundary near 0.5900

The NZD/USD pair loses ground to near 0.5930 during Wednesday's early European session.
New
update2024.11.06 16:41

Pound Sterling plunges as Trump trades intensify

The Pound Sterling (GBP) plummets to near 1.2850 against the US Dollar (USD) in early London trading hours on Wednesday.
New
update2024.11.06 16:35

German Factory Orders jump 4.2% MoM in September vs. 1.5% expected

Germany's Factory Orders rebounded in September, according to the official data published by the Federal Statistics Office on Monday, suggesting that the German manufacturing sector recovery is back on track.
New
update2024.11.06 16:12

Forex Today: US Dollar rallies as Donald Trump remains on track to win presidency

Here is what you need to know on Wednesday, November 6: The US Dollar (USD) gathers strength early Wednesday as markets react to US presidential election results, with the USD trading at its highest level since early July above 105.00.
New
update2024.11.06 16:10

Disclaimer:arw

All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.

The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.

  • Facebook
  • Twitter
  • LINE

Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy

I agree
share
Share
Cancel