Canadian Dollar falls back into two-week lows after US PMI data beat sends Greenback higher
|- Canadian Dollar falls back as investors pile into USD once more.
- Crude Oil extends Monday’s losses, evaporating CAD support with it.
- The Bank of Canada is due for its latest rate statement on Wednesday.
The Canadian Dollar (CAD) has slipped back into its lowest bids in almost three weeks against the US Dollar (USD) as broad-market flows reverse direction and pile back into the Greenback following a bumper reading for the US Purchasing Managers’ Index (PMI) that soundly thumped market expectations.
The Bank of Canada (BoC) is set to announce its latest rate call on Wednesday, and Loonie traders will be looking for the Canadian central bank to hold their reference rate at 5% while leaving the way open for more potential hikes to come later on. Market participants expect little change in the BoC’s forward guidance as Canadian policymakers grapple with a domestic economy that is seeing flagging growth indicators but still high inflation on the back of soaring energy prices.
Crude Oil prices are seeing a downside snap on Tuesday, with West Texas Intermediate (WTI) adding to Monday’s decline. The oil-backed Loonie is seeing its supportive base go up in smoke as crude barrels backslide, pushing the CAD into its lowest prices against the USD since October 5.
Daily Digest Market Movers: Canadian Dollar slips as broader market picks up the Greenback
- CAD fumbles to an almost three-week low as investors bid the USD.
- US October PMIs beat the Street, climbing over Wall Street’s forecasts to chalk in gains for the productivity indicator.
- The US Manufacturing PMI printed at a flat 50 versus the expected 49.5 decline from the previous 49.8 reading.
- The US Services PMI gave an impressive reading, coming in at 50.9 and handily vaulting over the forecasted 49.9 against September’s 50.1.
- The dual PMI beats sent the Composite PMI back to 51, its highest reading since July.
- Crude Oil continues to slide, dragging down CAD support with it.
- WTI barrels are down over 7.5% from Friday’s peak.
- BoC Preview: keeping rates on hold and the prospect of further hikes alive
Technical Analysis: Canadian Dollar gives up more ground as investors favor the US Dollar, USD/CAD taps 1.3755
The Canadian Dollar (CAD) is down almost 0.7% against the US Dollar (USD) in Tuesday’s trading session as markets go broadly USD bullish, taking the USD/CAD pair to its highest bids in almost three weeks.
The USD/CAD pinged 1.3755 on Tuesday after reversing direction from an intraday low of 1.3661. The next immediate barrier for USD/CAD bulls will be October’s early high of 1.3785, while the floor for sellers currently sits at the last swing low near 1.3569.
The US Dollar has gained nearly 5% against the Canadian Loonie since July’s low point near 1.3090, and the USD/CAD continues to find technical support from the 50-day Simple Moving Average (SMA) currently lifting into 1.3600.
An extended rally will see the USD/CAD set for a challenge of 2023’s highs at 1.3862, while a full bearish reversal will find the floorboards near the 200-day SMA currently parked just south of 1.3500.
USD/CAD Daily Chart
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 Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.72% | 0.71% | 0.37% | -0.30% | 0.06% | 0.08% | 0.27% | |
| EUR | -0.71% | 0.00% | -0.35% | -1.03% | -0.66% | -0.65% | -0.41% | |
| GBP | -0.72% | 0.00% | -0.34% | -1.03% | -0.66% | -0.65% | -0.46% | |
| CAD | -0.38% | 0.34% | 0.34% | -0.69% | -0.32% | -0.30% | -0.12% | |
| AUD | 0.31% | 1.02% | 1.02% | 0.67% | 0.36% | 0.38% | 0.57% | |
| JPY | -0.06% | 0.66% | 0.66% | 0.32% | -0.42% | 0.02% | 0.18% | |
| NZD | -0.08% | 0.65% | 0.64% | 0.30% | -0.38% | -0.01% | 0.18% | |
| CHF | -0.26% | 0.46% | 0.46% | 0.12% | -0.56% | -0.20% | -0.18% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Canadian Dollar FAQs
What key factors drive the Canadian Dollar?
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
How do the decisions of the Bank of Canada impact the Canadian Dollar?
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
How does the price of Oil impact the Canadian Dollar?
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
How does inflation data impact the value of the Canadian Dollar?
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
How does economic data influence the value of the Canadian Dollar?
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
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