If the US dollar is holding steady, as well as the Canadian dollar, the US Federal Reserve is holding the range ahead of the next report. The Federal Reserve does not want the dollar to fall too far and it will most likely hold the range as the labor market is much stronger than expected.
The oil companies have spent billions on exploration and production. The dollar is down, but the markets are allowing that to work in their favor because the oil producers are being pushed aside. If the Federal Reserve sees a sharp downturn in the market, the currency may quickly rise again, causing problems for those who own that US dollar.
But, if the dollar holds up, the dollar may start falling. In this scenario, oil producers and investors will be forced to get on the wrong side of the Fed and begin selling assets and sell the currency. Unfortunately, many US investors will not understand this risk and will continue to hope for a rebound of the dollar. That will make them very rich while hurting the middle class.
Both the Canadian and US economies are beginning to slow down at a rate that exceeds normal expectations. The weakness of the Canadian dollar has already caused the price of Canadian goods to rise and it looks like it is only going to continue to do so.
On January 8, the Canadian dollar had been trading at the same level it was at prior to the January release of the jobs report. Now, the Canadian dollar is back down to the levels seen during the summer months of 2020.
The price of gas prices are rising all over the country at a time when we have less oil, less money and fewer jobs. Those who do have jobs have been given raises and bonuses. Many companies are cutting back on their purchases and investments to avoid increasing costs.
The oil companies have been heavily investing in exploration and production, and they are losing a lot of money, especially in the United States. The world economy is starting to slow down and investors are wary. If the dollar weakens, then investors become more interested in real assets.
In January, many people saw the Canadian dollar climbing. In February, the Canadian dollar fell and has continued to drop since. Those who purchased US dollars during the higher-than-normal rates saw a corresponding rise in their investments, which are more valuable than the dollar.
A strong US dollar means investors pay less for the future interest rates. But, when the dollar weakens, that weakens the value of the future payments. It can take years to recover from this kind of depreciation.
The central banks need to look at this and see how the market is performing and determine if the dollar needs to weaken further. If the dollar is holding steady, the central banks should not consider weakening the dollar. Since most investors buy as the dollar rises, if it drops, they will lose money as well.
The Federal Reserve could call another meeting before the end of the month to discuss the results of the January report and the timing of the next report. When the next report comes out, the Fed should keep the range and then proceed with the next meeting.
Many believe that the weak dollar has been good for the Canadian dollar and has allowed Canadian commodities to move higher. However, there are many indicators suggesting that the market is on a downward trend and the Canadian dollar may start falling. soon.