- Usd/CAD carries less than 1.4200 as the US dollar will temporarily gain ground.
- The US dollar expectations are not certain due to the multiple opposite winds.
- Investors are awaiting Canadian CPI data, which will affect BOC’s monetary policy expectations.
The USD/CAD pair rises to approximately 1.4190 in the North American session on Monday after his recovery from his lowest level in two months at 1.4150, which was published on Friday. LONIE’s pair is composed higher with the US dollar’s rise (USD), where the US dollar index (DXY) has its lowest level for two months at 106.60. Investors must prepare for high trading volume, as American stock markets (the United States) and Canada are closed because of the Family Day and the day of the President, respectively.
However, the US dollar’s view is still unconfirmed because its safe call has diminished, as investors see the tariff agenda of President Donald Trump as less fear of thought.
On Thursday, Donald Trump did not reveal a detailed mutual tariff plan and asked his team to work on. However, the noise from a tweet in fact indicated that he is ready for the plan and will impose it as soon as possible.
“Three wonderful weeks, and perhaps the best at all, but today it is the big: mutual definitions !!!” Trump said in the early trading hours in North America on Thursday.
On the economic data interface, retail data in the poor United States was also on the US dollar. Retail sales data, a major measure of consumer spending, decreased at a faster than expected by 0.9 % in January.
Meanwhile, the Canadian dollar (CAD) is expected to perform sideways as investors are waiting for the Canadian Consumer Prices Index data (CPI) for January, which will be issued on Tuesday. The consumer price index is estimated at the head of the month for a month, has grown 0.1 % after a 0.4 % deviation in December. Inflation data will affect market speculation about whether the BOC Bank will reduce interest rates again at the March Policy meeting.
Questions and answers in US dollars
The USD (USD) is the official currency of the United States of America, and a “reality” currency for a large number of other countries where there is a circulating alongside local notes. It is the world’s most trading currency, which represents more than 88 % of all global foreign exchange rate, or on average $ 6.6 trillion in transactions per day, according to data from 2022. After World War II, the United States assumed responsibility from British pound as a backup currency in the world. For most of its history, the US dollar was backed by gold, even the Bretton Woods agreement in 1971 when the golden standard went.
The most important individual factor that affects the value of the US dollar is the monetary policy, which is formed by the Federal Reserve (Fed). The Federal Reserve has two states: to achieve price stability (control of control) and enhance full employment. Its primary performance to achieve these two goals is to adjust interest rates. When prices rise very quickly and inflation is 2 % higher than the Federal Reserve goal, the Federal Reserve will raise rates, which helps the value of the dollar. When inflation decreases to less than 2 % or the unemployment rate is very high, the Federal Reserve may reduce interest rates, which weighs to green.
In maximum situations, the Federal Reserve can also print more dollars and quantitative mitigation (QE). QE is the process that the Federal Reserve increases significantly from the flow of credit in a suspended financial system. It is a measure of the non -standard policy used when the credit is dry because banks will not lend to each other (for fear of failing to pay the opposite end). It is the last resort when it is unlikely to achieve interest rates simply the necessary result. The Federal Reserve is the preferred to combat the credit crisis that occurred during the great financial crisis in 2008. It includes the printing of the Federal Reserve more dollars and their use to buy US government bonds mostly from financial institutions. QE usually leads to the weakest US dollar.
The quantitative tightening (QT) is the opposite process in which the Federal Reserve stops buying bonds from financial institutions and does not invest the manager from the bonds he holds in new purchases. It is usually positive for the US dollar.
