Why The Canadian Dollar Weakened Against The US Dollar

If you are updated on the latest CAD Forecast, you will notice that the Canadian dollar has weakened against the US dollar. The Canadian dollar is pulling back from the almost 2-week high earlier in the session because investors weighed in on the prospects of an unexpected cut in interest rates by the Bank of Canada.

The Canadian dollar strengthened to a 2-week high because oil prices rose and investors were more optimistic that the trade war between the US and China will be resolved. Both the US and China sought to ease trade tensions with Beijing calling for calm and Trump predicting a trade deal. As everyone knows, the markets fell when new tariffs were imposed by both countries.

Two days ago, the Canadian dollar was trading at 0.3% lower at 1.3296 to the US dollar or 75.21 US cents. According to Adam Button, chief currency analyst at ForexLive, there is lots of chatter of Canadian dollar selling flows. However, traders are thinking that a surprise rate cut may be possible. The possibility of an interest rate cut during the central bank’s September 4 policy announcement has climbed from less than 10% at the beginning of the month to 25%.

According to Button, Bank of Canada is strongly focused on trade risks and has obviously gone to the wrong direction. Last month, the Bank of Canada highlighted the risks of trade wars to the global economy and has left its benchmark interest rate on hold at 1.75%. On the other hand, the Federal Reserve of the US has eased interest rates for the first time since 2008.

The Canadian dollar weakened even as oil, one of the major exports of Canada, strengthened. US crude oil futures have settled at 2.4% higher at $54.93 per barrel. Canada’s bond prices went higher across the flatter yield curve to sympathize with the US Treasuries.

Since the US and China trade war has not yet been resolved, it is a wise move to be updated with CAD Forecast to know where the Canadian dollar stands against other currencies. CAD forecasts are released daily and available for free. Br updated before making business decisions.

 

 

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