“That means that the Canadian dollar is much less attractive to global investors,” Schamotta said. For the whole year, it sees growth at 1.9 per cent, down slightly from its earlier forecast of 2 per cent. Gold prices also headed lower with the February contract down $1.50 to US$1,232.90 an ounce. Look for the USD/CAD to continue to be rangebound but the US dollar to gain strength as the US moves closer to raising interest rates and this would move USD/CAD closer to 1.30.
USD/CAD Forecast: Loonie Lifts Amid Oil Gain, Trade Deal Hope
However, talks between China and the US have raised hopes of a better future for oil and Canada’s economy. 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.
US Dollar Index at Key Levels Amid Cautious Fed, Trade Talks
It said that a strengthening U.S. economy and the fall in oil prices won’t be enough to offset troubles in the eurozone and emerging markets. The murky outlook for the Canadian economy due to falling oil prices has created a level of uncertainty and the full extent of the blow to the Canadian economy is unknown. This is precisely the reason the Bank of Canada acted preemptively to cut interest rates. Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar.
Nevertheless, if oil prices do fall again, back to near the $40/bbl level, another rate cut in Canada could be expected and this would be a big negative for the Canadian dollar. While the US Federal Reserve is in rate hike mode, the Bank of Canada has created uncertainty with respect to its next move, and many expect a 40% change that another interest rate cut could occur by the end of 2015. The USD/CAD has been trading in a range between 1.27 and 1.23 seemingly quite content and looking for direction.
How does inflation data impact the value of the Canadian Dollar?
Employment was stronger than expected, and business activity in the services sector continued expanding. The USD/CAD forecast points to strength in the oil markets due to hopes of a trade deal between China and the US. However, the move was subdued as market participants looked forward to the FOMC policy meeting. 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 coinbase exchange review the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases.
The Canadian dollar bears are hoping the Canadian economy reports poor GDP and jobs data in Q1 and Q2 due to falling oil prices and weaker consumer confidence. This could cause the Bank of Canada to cut interest rates again at some point, especially if oil falls below $40/bbl. Experts are forecasting weaker growth, which will impact oil demand.
- This factor alone will provide a strong push for the US dollar to continue to strengthen in the latter half of this year.
- 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.
- The author has not received compensation for writing this article, other than from FXStreet.
- Bank of Canada and Oil PricesThe Bank of Canada cut interest rates and shocked the markets earlier this year.
- But it wasn’t the fine print that moved markets—it was the mood shift.
What key factors drive the Canadian Dollar?
He referenced how a lower loonie previously led to a resurgence of the manufacturing and export industries. The weakening Canadian dollar could have a substantial effect on imports — raising the cost of products coming into Canada. Investors looking at the global landscape for 2025 “only see one country where we may get impressive growth, and that’s the United States,” he added. “That should help to support the Canadian dollar a little bit toward the end of next year,” he said. The Bank of Canada will decide soon whether to keep its interest rate the same or lower it again. Canada’s unemployment rate had been hovering around 6.6 per cent at the end of 2014 and the start of this year, before jumping to 6.8 per cent in February as job growth stalled in the month.
Dollar hovers near two-month peak as Fed easing bets ebb before inflation data
Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you’re a beginner or an expert, find the right partner to navigate the dynamic Forex market. “A good portion of the ‘Canadian dollar weakness’ is U.S. dollar strength,” he said. Schamotta predicts a further decline in the early months of next year and a gradual, modest improvement in the loonie through the remainder of 2025.
Copper prices were slammed as the March contract tumbled 13 cents to US$2.51 a pound, on top of a 12-cent slide over the previous three sessions as inventories of the metal viewed as an economic bellwether grow. Copper prices have also been impacted by slowing growth in China and have tumbled 25 per cent over the past year. And news reports of a loonie that keeps hitting new lows can have a negative impact on the electorate, giving them the impression of an unhealthy economy. In 1993, that Conservative government, now headed by Kim Campbell, was nearly wiped out of Parliament entirely by the Liberals under Jean Chretien. The loonie had fallen nearly 8 per cent in the 12 months before that election. Any hint of rising inflation risks would quicken the pace of US interest rate hikes and further stimulate the US dollar move higher.
It’s because many investors are worried about what’s happening in the United States. He coinmama exchange review recently announced new taxes, called tariffs, on goods from other countries. These changes made investors nervous, so they started moving their money out of U.S. investments. Economies.com provides the latest technical analysis of the USD/CAD (US Dollar/Canadian Dollar or Loonie).
The Bank of Montreal said Monday that prices for Canadian oil exports are also at their lowest point since 2009. The Bank of Canada prefers a lower Canadian dollar as this would boost the export sectors in Canada such as manufacturing. While it takes some time to take effect, exports should benefit and contribute more to Canada’s economy with a lower Canadian dollar.
Certainly very few voters make a decision on who to vote for based on the axitrader review exchange rate. Research suggests a falling currency is a good news/bad news story. If you’re a Canadian with an investment portfolio your foreign investments are worth more in loonie terms, and you feel richer. But if you’re buying from abroad or travelling to a foreign country, you feel poorer.
- Commodity prices fell as a World Bank report said it now expects the global economy to expand three per cent in 2015, down from its earlier forecast of 3.4 per cent.
- This is the biggest momentum swinger for the Canadian dollar – it’s all about oil prices.
- However, talks between China and the US have raised hopes of a better future for oil and Canada’s economy.
- 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.
- It said that a strengthening U.S. economy and the fall in oil prices won’t be enough to offset troubles in the eurozone and emerging markets.
- Expect the US dollar to continue to strengthen as the US Federal Reserve raises interest rates in the latter half of the year.
Greece and the EurozoneWhile the Greece issue is now in the backdrop, Eurozone issues remain. Growth is weak and the ECB is in stimulus mode to boost the eurozone economies. While some flows should occur from Europe to Canada and this should be a benefit to the Canadian dollar. It is not a question of if but when the US Federal Reserve will hike interest rates in 2015. This factor alone will provide a strong push for the US dollar to continue to strengthen in the latter half of this year. While most global economies are adding stimulus and cutting interest rates, the US is doing the opposite and this is attracting flows of funds in to the US dollar.
The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. 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. Meanwhile, the Bank of Canada delivered its second straight outsized interest rate cut this month, bringing its key rate down to 3.25 per cent.
Softer-than-expected inflation data for April released on Tuesday provided a sigh of relief for markets, with the widely-feared inflation shock from tariffs not materializing yet. With strictly low-tier data on the offering, the Canadian Dollar is entirely at the mercy of market-wide sentiment flows this week. The end of the temporary reprieve of US “reciprocal tariffs” also looms over the horizon, and firm details of a possible trade deal that would otherwise avert steep import taxes on Canadian goods bound for the US remain entirely absent.