Tag: USDCAD

  • Canadian Dollar loses ground for a third straight day as trade war heats up

    Canadian Dollar loses ground for a third straight day as trade war heats up


    • The Canadian Dollar shed 0.3% against the Greenback on Tuesday.
    • Bank of Canada (BoC) rate call looms large during the midweek session.
    • US President Trump’s trade war against Canada has hit a new gear.

    The Canadian Dollar roiled on Tuesday, falling roughly six-tenths of one percent against the Greenback at its lowest as markets weigh the latest evolution in US President Donald Trump’s self-styled trade war against Canada. The Canadian Dollar is still testing within familiar technical territory against the US Dollar, however, the Loonie is poised for further losses after shedding weight for three straight sessions against the USD, all on rising trade war fears.

    The Bank of Canada (BoC) is slated to deliver its latest rate call on Wednesday, however markets are getting thrown for a loop on whether the BoC will be able to deliver its expected quarter-point rate trim as trade war rhetoric from team Trump ramps up. Donald Trump took to his favorite social media app to declare that he’s instructed his Secretary of Commerce to double tariffs on all steel and aluminum imported from Canada to 50%, also to begin on Wednesday.

    Daily digest market movers: Canadian Dollar withers again on new tariff threats

    • US President Donald Trump vowed via social media to impose an additional tariff on Canadian steel and aluminum, bringing the total to 50% and declaring the tariff to go into effect on Wednesday.
    • Ontario Prime Minister Doug Ford was quick to retaliate against the US with a flat export tax of 25% on all electricity sent to the US, which sent Donald Trump into a further tailspin on social media.
    • Ontario PM Ford followed up with an additional warning that Ontario could shut up energy exports to the US entirely, which would see 1.5M Americans without power.
    • White House officials followed up with an announcement that the “paperwork” on additional steel and aluminum tariffs targeted at Canada hasn’t been “signed” in an effort to cross the moat that President Trump continues to dig for the US.
    • President Trump reiterated his misunderstanding of Canadian cap-trade tariffs on US dairy products that are baked into the USMCA trade agreement, which Donald Trump himself spearheaded during his first term in the White House.
    • The BoC is slated to cut interest rates by another quarter of a point to 2.75% on Wednesday, but rising tariff concerns could throw a wrench in the works.

    Canadian Dollar price forecast

    The Canadian Dollar whipsawed against the Greenback on Tuesday, falling 0.9% top-to-bottom at its absolute lowest as markets churn on geopolitical headlines. The Loonie has somewhat recovered its footing, but still remains down for a third straight session against the US Dollar. USD/CAD has risen around 2% in three straight trading days as the Loonie backslides against the Greenback.

    USD/CAD 4-hour chart

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



    Source link

  • Canadian Dollar flattens ahead of key labor prints

    Canadian Dollar flattens ahead of key labor prints


    • The Canadian Dollar churned on Thursday, holding flat against the Greenback.
    • PMI figures from Canada contracted sharply in January, limiting Loonie gains.
    • Key US NFP and Canadian employment figures are due on Friday.

    The Canadian Dollar (CAD) spun in a tight circle on Thursday, churning chart paper near 1.4300 against the US Dollar (USD) as markets gear up for another Nonfarm Payrolls (NFP) Friday. Markets are treading water near familiar levels as investors shrug off the early week’s trade war fears and resume focusing on hopes for future Federal Reserve (Fed) rate cuts.

    Canadian Purchasing Managers Index (PMI) figures for January sharply missed the mark on Thursday. Canadian Net Change in Employment and Average Hourly Wages numbers are due on Friday but will be overshadowed by the much larger US NFP jobs data package.

    Daily digest market movers: Canadian Dollar flattens ahead of NFP

    • The Canadian Dollar has fought back from 21-year lows this week, but remains trapped in familiar consolidation territory against the Greenback.
    • Canada’s Ivey PMI for January contracted sharply on a seasonally adjusted basis, falling to a four-year low of 47.1.
    • US tariffs on Mexico and Canada have been kicked down the road by another 30 days, and market tensions are loosening for the time being. 
    • US tariffs on China are still in place, as are reciprocal tariffs on the US from China, but these tit-for-tat import fees are largely symbolic and markets are expected to circumvent them quickly.
    • Canada is expected to add far fewer jobs in January compared to December, down to 25K from 90.9K, and the Canadian Unemployment rate is forecast to tick up to 6.8% from 6.7%.
    • Friday’s US NFP is likewise expected to shift lower to 170K net new jobs additions from 256K, but bumper labor prints from earlier in the week could signal an upside surprise.

    Canadian Dollar price forecast

    With key data due to wrap up the trading week, the Canadian Dollar is stuck back in familiar consolidation territory against the US Dollar. USD/CAD remains hung up on the 1.4300 handle, at the bottom end of a choppy sideways grind that has kept the pair traveling horizontally since mid-December.

    The Loonie tumbled early this week to a 21-year low against the Greenback, sending USD/CAD to a two-decade high near 1.4800, but the move was unsustainable and the pair is now back to its middling ways. Price action is drawing into the midrange at the 50-day Exponential Moving Average (EMA), and it will take a material shift in markets to punch in new technical levels.

    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.

     



    Source link

  • USD/CAD slumps below 1.4300 as CAD capitalizes on Trump’s suspension of tariff orders

    USD/CAD slumps below 1.4300 as CAD capitalizes on Trump’s suspension of tariff orders


    • USD/CAD falls sharply below 1.4300 as the Canadian Dollar continues to advance on US President Trump’s decision to postpone tariffs on Canada.
    • BofA expects US tariff threats to China will continue to persist until a new USMCA deal gets negotiated.
    • Investors await the US ISM Services PMI and the ADP Employment data for December.

    The USD/CAD pair extends its losing streak below the key level of 1.4300 in Wednesday’s European session. The Loonie pair weakens as the Canadian Dollar (CAD) continues to gain, given that United States (US) President Donald Trump delayed his orders to impose 25% tariffs on Canada for 30 days. President Trump suspended orders after Canada agreed for criminal enforcement at borders to stop the flow of drugs and undocumented immigrants into the US.

    A suspension in tariff orders on Canada has forced market experts to revise the Canadian economic outlook, who were accounting for the impact of levies. While the Canadian Dollar has surged this week against the US Dollar due to a relief rally from Trump’s decision to put the tariff plan on hold, analysts at Bank of America (BofA) expect the rally is unlikely to sustain as US tariffs threats and headlines on Canada to persist until a “new United States-Mexico-Canada Agreement (USMCA) deal is negotiated”.

    This week, investors will focus on the Canadian employment data for January, which will be released on Friday. The employment report is expected to show that the economy added 25K workers, significantly fewer than 90.9K addition seen in December. The Unemployment Rate is estimated to have accelerated to 6.8% from the former release of 6.7%.

    The labor market data will influence market expectations for the Bank of Canada’s (BoC) monetary policy outlook. Currently, traders expect the BoC to cut interest rates by 25 basis points (bps) to 2.75% in the March meeting.

    Meanwhile, the US Dollar (USD) underperforms its major peers as the market sentiment turns cheerful amid expectations that Trump’s tariff agenda would be less fearful than expected.

    On the economic front, investors will focus on the US ADP Employment Change and the ISM Services PMI data for January, which will be published in Wednesday’s North American session.

    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.

     



    Source link

  • Canadian Dollar flattens ahead of key labor prints

    USD/CAD weakens to near 1.4300 as Trump delays tariffs policy


    • USD/CAD softens to around 1.4300 in Tuesday’s early Asian session.
    • Trump did not impose tariffs on US trading partners on his first day in the White House.
    • BoC’s latest Business Outlook Survey suggested that the overall economic sentiment remains subdued.

    The USD/CAD pair remains on the defensive around 1.4300 during the early Asian session on Tuesday, pressured by the weakening of the US Dollar (USD). The Greenback trades in choppy trading as traders await further details on President-elect Donald Trump’s economic plans, including tariff policies. 

    Bloomberg reported on Monday that Trump will not announce tariffs immediately after his inauguration on Monday but will call federal agencies to study tariff policy and the United States’ trade ties with Canada, Mexico, and China. The USD faced some selling pressure following this report. 

    The US Federal Reserve (Fed) is anticipated to hold its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. However, investors expect Trump’s policies could fuel inflation pressures, which may only allow the Fed to cut rates once more. This, in turn, might help limit the USD’s losses in the near term. 

    On the Loonie front, the Bank of Canada’s (BoC) Business Outlook Survey showed Canadian firms see improved demand and sales in the coming year, fuelled by rate cuts, but are concerned about the potential risks from promised US trade policies from Trump’s administration. Meanwhile, the decline in crude oil prices might drag the commodity-linked Canadian Dollar (CAD) lower. Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.

    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.

     



    Source link