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Canada’s Carney rules out changing stance in US trade talks
Canada’s negotiating position in trade talks with the United States (US) remains unchanged, Canadian Prime Minister Mark Carney said on Monday. Any progress in the negotiations reflects Washington moving towards Canada’s stance, Carney added.
Carney reiterates Canada’s trade stance
Canada has not changed its position in trade talks with the US.
Not willing to sign US trade terms offered in August.
To the extent any progress has been made in US trade talks, it's because the US is coming closer to our position.
USD/CAD edges higher
A daily gain of 0.06% leaves USD/CAD trading at 1.4012 at the time of writing.
Canadian Dollar: Key Drivers Explained
Interest rates set by the Bank of Canada (BoC), oil prices, economic performance, inflation and the trade balance are the main drivers of the Canadian Dollar (CAD). Oil is Canada’s largest export, while the trade balance measures the difference between the value of the country’s exports and imports. Investor sentiment also matters: an appetite for riskier assets (risk-on) generally supports the CAD, whereas a preference for safe havens signals a risk-off mood. Economic conditions in the US are another important influence on the Canadian Dollar, given that the US is Canada’s largest trading partner.
By determining the interest rate at which banks lend to each other, the Bank of Canada (BoC) influences borrowing costs across the economy and has a substantial impact on the Canadian Dollar. Its primary objective is to keep inflation at 1-3%, raising or lowering interest rates to achieve this. Relatively high rates generally support the CAD. Credit conditions can also be adjusted through quantitative easing or tightening: easing tends to weigh on the currency, while tightening tends to strengthen it.
As petroleum is Canada’s largest export, changes in oil prices tend to affect the Canadian Dollar immediately, making oil a major driver of the currency’s value. A rise in oil prices generally lifts the CAD by increasing overall demand for the currency; falling prices usually have the reverse effect. More expensive oil also tends to increase the likelihood of a trade surplus, providing further support for the CAD.
Traditionally, inflation was regarded as detrimental to a currency because it erodes the value of money. With cross-border capital controls having been relaxed, however, the reverse has been true in modern times. Central banks tend to respond to higher inflation by raising interest rates, drawing in capital from international investors seeking attractive returns. Those inflows boost demand for the domestic currency, which in Canada is the Canadian Dollar.
By indicating the economy’s health, macroeconomic releases can move the Canadian Dollar. GDP, manufacturing and services PMIs, employment figures and consumer sentiment surveys are among the indicators that can steer the CAD. Economic strength supports the currency by attracting foreign investment and potentially prompting the Bank of Canada to raise interest rates. Weak readings, by contrast, are likely to put downward pressure on the CAD.
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