USD/CAD pair weekly decline, The USD/CAD pair remains under some selling pressure for the fourth successive day on Friday and drops to a fresh weekly low heading into the European session.

Topics
The after-effect of President Trump
The US-Canada Trades
The COVID-19 worsening in China

The after-effect of President Trump

Spot prices, however, manage to hold above the 1.3300 round-figure mark
and remain at the mercy of the US Dollar price dynamics.
The Canadian Dollar continues to be weighed down by concerns
over trade relations with the US after President Trump
announced plans to impose tariffs on Canadian steel and aluminium imports.
The move sparked fears of a potential trade war between the two countries,
which could weigh heavily on Canada’s export-dependent economy.
Meanwhile, data from Friday showed that inflation in Canada ticked higher in March as energy prices rose sharply.
However, core inflation remained well below 2%,
suggesting that there is little pressure on businesses to raise prices.
This could keep a lid on any further gains in CAD rates in the near term.

The minutes from the most recent Federal Open Market Committee (FOMC) meeting were released on Wednesday
and showed a more dovish assessment of the economy than expected.
This has weighed on the US dollar and is seen as a key factor acting as a headwind for the USD/CAD pair.

The minutes showed that members were concerned about downside risks to growth,
including trade tensions and slowing global growth.
In addition, members noted that inflation remains muted despite stable labour market conditions.
As a result, many members felt that it was appropriate to keep interest rates unchanged at this time.

This dovish tone is weighing on the US dollar and helping push the USD/CAD pair lower.
The pair is trading near 1.3250, which is just above its lowest level in nearly two weeks.
With no major data releases scheduled for today,
we could see further downside in the pair if traders continue to sell the US dollar.

The US – Canada Trades

The Fed raised rates by 25bps at their December meeting, which was widely expected.
However, what wasn’t expected was that they would signal a slower pace of hikes in 2019.
This has led to a lot of speculation about what the Fed is up to.

There are a few possible explanations for why the Fed might be slowing down its rate hiking cycle.
One possibility is that they want to avoid spooking markets and causing a sell-off.
Another possibility is that they believe the economy is not as strong as it appears,
and they don’t want to overheat it by raising rates too quickly. Whatever the reason,
this change in tone from the Fed has caught many market participants off guard
and has led to some volatile trading conditions in recent weeks.

However, one thing remains clear: The Fed still intends to gradually tighten monetary policy over time
and we can expect at least one more rate hike in 2019 (most likely at their June meeting).
So, while there may be some short-term turbulence caused by this change in strategy from the Fed,
investors should remain focused on the longer-term outlook
for interest rates which still point to higher levels eventually.
It seems that everywhere you look these days,
there’s some sort of news or commentary about the stock market.
And while a lot of it is positive, there’s also been a fair share of negativity as well.
So, what does all this mean for traders and investors?

Well, first off, it’s important to remember that the stock market is just one part of the overall economy.
There are other factors at play that can impact markets – both positively and negatively.
For example, we’re seeing concerns about the coronavirus outbreak in China weighing on global markets.

The COVID-19 worsening in China

This is understandable given the potential implications for global trade and economic growth.
However, it’s important to keep things in perspective,
yes, there are risks associated with the outbreak but so far it seems contained
and its impact appears to be limited (at least so far).

In terms of trading opportunities, this current environment presents both challenges
and opportunities. On one hand, volatility has picked up which can make things more difficult for traders.
The COVID-19 situation in China is worsening by the day,
and this is having a knock-on effect on oil prices.

While the global demand for oil remains strong,
traders are increasingly worried that the outbreak will dent fuel demand in China,
the world’s second-largest consumer of crude.
This is keeping a lid on any further gains for oil, and as a result, the USD/CAD pair.

However, it’s important to remember that while the current situation in China is worrying,
it’s still too early to say how big an impact it will have on global oil demand.
So far, there has been no significant slowdown in other major consuming nations such as the US or Europe.
And with prices already at relatively low levels,
there could be scope for a rebound if fears around COVID-19 start to ease.

USD/CAD pair weekly decline

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