- USD/CAD rises marginally while the US dollar index acquires approximately 0.5 %, above 100.00.
- The US dollar rises despite the PMI contract to manufacture ISM in the United States at a faster pace in April.
- BOC believes that the impact of previous interest rate discounts has not yet moved to the economy.
Dollar pair/cad The edges are up to approximately 1.3820 during the trading hours in North America on Thursday. LONIE’s pair moves a little higher, although the US dollar (USD) has attracted great offers after issuing the Purchase Procurement Index data (PMI) for the United States of America (USA).
US dollar index (DXY) increased by approximately 0.5 % over 100.00, although the agency that has reported that the activities in the manufacturing sector continued to decrease at a faster pace. the PMI manufacturing It came in 48.7, less than March 49.0 reading, but higher than 48.0 estimates. The number below indicates a 50.0 threshold to shrink in economic activities.
The US dollar expectations are already bleak amid uncertainty about trade relations between the United States and China. The White House comments indicate that the two countries have not yet started employment discussions.
American commercial actor Jameson Jarir stated in an interview with Fox news On Wednesday, trade discussions have not started with Beijing yet since the imposition of mutual definitions,
In the Canadian region, investors are looking for new signals about whether the Bank of Canada will start reducing interest rates again from the political meeting in June. BOC minutes for April meeting on Wednesday showed that the central bank left interest rates unchanged by 2.75 %, amid uncertainty about economic expectations in the face of additional definitions announced by US President Donald Trump on April 2. This was the first time that BOC kept borrowing to wait seven times in a row.
the BOC The minutes also indicated that policy makers still believe that the effect of discounts on previous prices was not perceived in the economy, and therefore, it was possible to reduce policy at this stage a “premature” step.
The minutes also stated that the central bank will remain flexible towards monetary policy adjustments, so that “the forecasts of inflation remained for long -term installed.”
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 most trading currency in the world, as it represents more than 88 % of the rotation of global foreign currencies, or on average $ 6.6 trillion in transactions per day, according to data from 2022. In the aftermath of World War II, the United States took over the British pound the world reserves. 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.
