The USD/CAD currency pair has been on a downward trend in recent weeks, falling from 1.3400 to around 1.3200 as of August 2021. This decline can be attributed to a number of factors, including continued losses in the US Dollar Index and concerns over US inflation.
The US Dollar Index, which measures the value of the US dollar against a basket of other major currencies, has been on a downward trend since the beginning of the year. This is due in part to the Federal Reserve’s commitment to keeping interest rates low and continuing its bond-buying program, which has led to an increase in the supply of US dollars in the market.
At the same time, concerns over inflation in the United States have also contributed to the decline in the USD/CAD currency pair. Inflation has been on the rise in the US in recent months, with the Consumer Price Index (CPI) increasing by 5.4% in June 2021 compared to the same period last year. This is the highest rate of inflation seen in the US since 2008.
The increase in inflation has been driven by a number of factors, including supply chain disruptions caused by the COVID-19 pandemic, rising energy prices, and increased demand for goods and services as the economy reopens. While some analysts believe that this increase in inflation may be temporary, others are concerned that it could lead to a longer-term trend of rising prices.
The impact of these factors on the USD/CAD currency pair has been significant. As the US dollar has weakened and concerns over inflation have grown, investors have been moving their money out of US dollars and into other currencies, including the Canadian dollar. This has led to a decline in the value of the USD/CAD currency pair.
Looking ahead, it is unclear how long this trend will continue. The Federal Reserve has indicated that it may begin to taper its bond-buying program later this year, which could help to strengthen the US dollar. However, concerns over inflation are likely to persist, and could continue to put downward pressure on the USD/CAD currency pair.
Overall, the decline in the USD/CAD currency pair is a reflection of broader trends in the global economy, including the impact of the COVID-19 pandemic and concerns over inflation. While the situation is complex and uncertain, investors should continue to monitor these factors closely in order to make informed decisions about their investments.
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