Select Language

USD/CAD appreciates to near 1.3950 as traders adopt caution ahead of US CPI figures

Breaking news

USD/CAD appreciates to near 1.3950 as traders adopt caution ahead of US CPI figures

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2024.11.13 16:16
USD/CAD appreciates to near 1.3950 as traders adopt caution ahead of US CPI figures

update 2024.11.13 16:16

  • USD/CAD strengthens as the US Dollar appreciates due to optimism surrounding the Trump trades.
  • The implementation of US President-elect Donald Trump's proposed fiscal policies could delay further rate cuts by the Fed.
  • The commodity-linked CAD weakens as Oil prices decline following OPEC's lowered forecast for global Oil demand growth in 2024.

USD/CAD moves upwards for the fourth successive session, trading around 1.3960 during the early European hours on Wednesday. The primary factor contributing to the recent weakness in EUR/USD is the strength of the US Dollar (USD) amid optimism surrounding the Trump trades.

The implementation of US President-elect Donald Trump's proposed fiscal policies could stimulate investment, increase government spending, and bolster labor demand. However, this surge in economic activity could also fuel inflation risks.

On Tuesday, Minneapolis Fed President Neel Kashkari affirmed that the central bank remains confident in its ongoing battle against transitory inflation but cautioned that it is still too early to declare full victory. Kashkari also noted that the Fed would refrain from modeling the economic impact of Trump's policies until there is greater clarity on the specifics of those policies.

The decline in crude Oil prices continues to weaken the commodity-linked Canadian Dollar (CAD). Notably, Canada remains the largest Oil exporter to the United States (US). As of this writing, West Texas Intermediate (WTI) Oil trades near $68.00. Crude Oil prices fell after the Organization of the Petroleum Exporting Countries (OPEC) reduced its forecast for global Oil demand growth in 2024.

With a quiet economic calendar in Canada this week, the Loonie Dollar is taking a backseat to the Greenback. Traders are now turning their attention to the upcoming US inflation data release on Wednesday, which could provide more insight into future US policy.

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

 : 2024.11.13

Update

Last updated

 : 2024.11.13

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

USD/CAD Price Forecast: Bulls have the upper hand while above mid-1.3900s pivotal support

The USD/CAD pair edges higher during the Asian session on Friday, albeit it lacks follow-through buying and remains below the 1.4000 psychological mark amid mixed cues.
New
update2024.11.22 14:38

USD/CHF weakens to near 0.8850 ahead of US PMI data

The USD/CHF pair trades with mild losses around 0.8860 during the early European session on Friday.
New
update2024.11.22 14:32

EUR/USD depreciates to yearly lows near 1.0450, awaits PMIs from both nations

EUR/USD remains on a downward trend for the third consecutive session, hovering around 1.0470 during the Asian trading hours on Friday.
New
update2024.11.22 13:44

EUR/JPY bounces off multi-month low, down a little around 161.70 ahead of Eurozone PMIs

The EUR/JPY cross attracts some follow-through selling for the second straight day and drops to its lowest level since October 4 during the Asian session on Friday, albeit it managed to rebound a few pips thereafter.
New
update2024.11.22 13:37

India Gold price today: Gold rises, according to FXStreet data

Gold prices rose in India on Friday, according to data compiled by FXStreet.
New
update2024.11.22 13:37

Gold price advances to near two-week high, eyes $2,700 on geopolitical tensions

Gold price (XAU/USD) prolongs its uptrend for the fifth consecutive day on Friday and climbs to a nearly two-week top, around the $2,690-2,691 area during the Asian session.
New
update2024.11.22 13:12

GBP/USD falls to six-month lows near 1.2550 ahead of PMI figures from both economies

GBP/USD extends its losses for the third successive session, trading around 1.2580 during the Asian hours on Friday.
New
update2024.11.22 13:05

Silver Price Forecast: XAG/USD bounces back to near $31.00 due to safe-haven flows

Silver price (XAG/USD) retraces its recent losses, trading around $31.00 per troy ounce during the Asian hours on Friday.
New
update2024.11.22 12:19

USD/INR holds steady ahead of Indian PMI release

The Indian Rupee (INR) trades flat on Friday after hitting an all-time low of 84.50 against the US Dollar (USD) in the previous session.
New
update2024.11.22 12:18

Australian Dollar extends gains despite  mixed PMI

The Australian Dollar (AUD) continues to strengthen against the US Dollar (USD) following the release of mixed Judo Bank Purchasing Managers' Index (PMI) data from Australia on Friday.
New
update2024.11.22 11:29

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