Canadian Dollar recedes after BoC cuts rates and ends QT

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USD/CAD declines to near 1.4200 as US Dollar underperforms its peers – Crypto News

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3 days ago

February 20, 2025

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USD/CAD drops sharply to near 1.4200 as the US Dollar underperforms its major peers.
Slightly higher US Initial Jobless Claims have weighed on the US Dollar.
Fed officials are worried about growing upside risks to inflation.

The USD/CAD pair falls sharply to near the key level of 1.4200 in North American trading hours on Thursday. The Loonie pair weakens as the US Dollar (USD) underperforms its major peers, with the US Dollar Index (DXY) declining to near 106.70.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.32%	-0.25%	-1.00%	-0.24%	-0.62%	-0.76%	-0.28%
EUR	0.32%		0.06%	-0.69%	0.08%	-0.31%	-0.44%	0.02%
GBP	0.25%	-0.06%		-0.74%	0.02%	-0.37%	-0.51%	-0.01%
JPY	1.00%	0.69%	0.74%		0.77%	0.38%	0.20%	0.72%
CAD	0.24%	-0.08%	-0.02%	-0.77%		-0.38%	-0.52%	-0.03%
AUD	0.62%	0.31%	0.37%	-0.38%	0.38%		-0.14%	0.37%
NZD	0.76%	0.44%	0.51%	-0.20%	0.52%	0.14%		0.50%
CHF	0.28%	-0.02%	0.01%	-0.72%	0.03%	-0.37%	-0.50%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The Greenback faces selling pressure after the release of the slightly higher-than-expected United States (US) Initial Jobless Claims data for the week ending February 14. Department of Labor reported that individuals claiming jobless benefits for the first time were 219K, higher than estimates of 215K.

The US Dollar was already underperforming even though US President Donald Trump announced on Wednesday that tariffs on automobiles, semiconductors, and pharmaceuticals could be imposed over the next month or sooner. Market participants expect Trump’s tariff agenda could lead to a global trade war. Such a scenario will result in a global slowdown.

Meanwhile, hawkish Federal Open Market Committee (FOMC) minutes for the January meeting also failed to support the US Dollar. The FOMC minutes showed on Wednesday that officials were more worried about deepening upside risks to inflation due to Trump’s policies than risks to the labor market.

In the policy meeting, the Fed kept interest rates steady in the range of 4.25%-4.50% and guided a cautious stance on interest rate cuts.

In the neighboring nation, investors await the Canadian Retail Sales data for December, which will be released on Friday. Month-on-month Retail Sales, a key measure of consumer spending, are estimated to have expanded by 1.6% after remaining flat in December

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.