Select Language

Canadian Dollar backslides on fresh risk aversion

Breaking news

Canadian Dollar backslides on fresh risk aversion

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2025.09.03 02:27
Canadian Dollar backslides on fresh risk aversion

update 2025.09.03 02:27

  • The Canadian Dollar tumbled against the US Dollar on Tuesday.
  • After a long weekend, American markets have returned with a notable risk-off tilt.
  • PMI figures for both US and Canadian markets revealed increasing business concerns around tariffs.

The Canadian Dollar (CAD) took another backstep against the US Dollar (USD) on Tuesday, officially kicking off the September market window with a firm step into the bearish side as risk appetite withers.

Global markets are facing renewed concerns about government financing and debt levels, as well as knock-on inflation impacts from the Trump administration's ever-changing tariff policies. Businesses and firms in the manufacturing sector broadly reported an upswing in earnings through the third quarter, but mostly on the back of price increases as inventories eat of supplies at an increased pace.

Daily digest market movers: Fresh market concerns knock Canadian Dollar lower

  • The Canadian Dollar fell over one-half of one percent at its lowest against the US Dollar on Tuesday, before recovering to a more stable 0.2% decline.
  • Investor risk appetite faces a challenge in September as government budget deficits swell across developed economies and tariff impacts continue to grow.
  • The Institute for Supply Management (ISM) noted that respondents to their latest Purchasing Managers Index (PMI) noted that price gains are a result of demand outstripping supplies, with firms reticent to engage in hiring.
  • Many firms are noting sharp contractions in new orders, especially among businesses that deal with imports from Brazil and India, especially in the agriculture and construction materials segments.
  • The Standard & Poor's (SP) Canadian PMI reported a general softening in Canadian manufacturing declines, but Canadian firms continue to grapple with tariff effects, and are struggling to readjust supply chains in the face of souring trade with the US.

Canadian Dollar price forecast

Tuesday's bearish plunge in the Canadian Dollar has bolstered USD/CAD bids, sending the pair back into the 50-day Exponential Moving Average (EMA) as bullish pressure behind the Loonie dries up. A sharp adjustment to global risk appetite to kick off September has sent the safe-haven US Dollar higher, and USD/CAD is now challenging the 1.3800 once again.

USD/CAD remains fairly contained below the 200-day EMA near 1.3875, but further downside remains equally unlikely after a soft double-bottom from the 1.3730 region.

USD/CAD daily chart


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

 : 2025.09.03

Update

Last updated

 : 2025.09.03

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

GBP/USD tumbles ahead of full data docket

GBP/USD tumbled sharply on Tuesday, declining over 1.15% and sinking back below the 1.3800 handle for the first time in almost a month. Broad-market investor sentiment soured heading into the September trading month, with safe-haven flows into the US Dollar (USD) surging.
New
update2025.09.03 08:36

When is the Australian GDP release and how could it affect the AUD/USD?

Australia's Gross Domestic Product (GDP) growth productivity for the second quarter of 2025 is due early on Wednesday, at 01:30 GMT. Australian GDP is expected to rebound to 0.5% QoQ, a fair recovery from the previous quarter's 0.2%.
New
update2025.09.03 08:30

USD/JPY gains ground to near 148.50 amid political uncertainty in Japan

The USD/JPY pair trades on a stronger note around 148.50 during the early Asian session on Wednesday. Heightened political uncertainty in Japan weighs on the Japanese Yen (JPY) against the US Dollar (USD). The US JOLTS Job Openings and the Fed Beige Book will be published later on Wednesday. 
New
update2025.09.03 08:22

Japan's LDP to consider calling leadership election

Former Prime Minister Aso Taro will publicly call for a new Liberal Democratic Party (LDP) presidential election on Wednesday. This development adds new impetus to the attempt to force current Prime Minister Shigeru Ishiba's hand, Bloomberg reported on Wednesday. 
New
update2025.09.03 08:18

USD/CHF Price Forecast: Climbs to 0.8050 as risk aversion boosts USD

The USD/CHF advances for the third straight day, up by 0.57% on Tuesday trading at 0.8050 as risk aversion boosted the Greenback. Economic data revealed in the United States (US) was mixed, as business activity in the manufacturing sector showed that growth is slowing down.
New
update2025.09.03 08:09

Australia GDP expected to show soft growth in Q2

Australia will release its second-quarter (Q2) Gross Domestic Product (GDP) on Wednesday, with financial markets anticipating growth ahead of the announcement. The Australian Bureau of Statistics (ABS) is expected to report that the economy made modest progress in the three months to June 2025.
New
update2025.09.03 07:45

EUR/USD plunges below 1.1700 as Fed turmoil sparks risk-off move

The Euro tumbles late in the North American session, down by over 0.60% due to a risk-off mood triggered by threats to the independence of the Federal Reserve (Fed) and controversial US policy.
New
update2025.09.03 06:09

US President Donald Trump warns the US will cease to be a country if tariffs struck down

US President Donald Trump made an appearance on Tuesday, announcing that the US "Space Force" would be relocating to Huntsville, Alabama, which would now be dubbed "Rocket City".
New
update2025.09.03 04:12

AUD/USD steadies above 0.6500 as traders await Australia's Q2 GDP

The Australian Dollar (AUD) trims some of its earlier losses against the US Dollar (USD) on Tuesday, recovering from a five-day low as the Greenback loses momentum after its broad intraday rally.
New
update2025.09.03 03:40

Gold smashes record above $3,500 as risk aversion fuels rush

Gold prices soar to a new all-time high past the $3,500 figure on Tuesday, rallying more than 2% even though the US Dollar advances and US Treasury yields rise. Risk aversion dominates, despite forecasts of a potential Federal Reserve (Fed) rate cut in September.
New
update2025.09.03 03:10

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