Most recent article: Canadian Dollar cycles familiar levels on Thursday as markets await impactful data
- Canadian Dollar sees some gains but loses further ground against US Dollar.
- Low-impact Canada economic data fails to move the needle as investors focus on US data.
- Crude Oil bids struggle to hold steady, limit Loonie gains.
The Canadian Dollar (CAD) found some gains against most of its major currency peers, but saw further declines against the US Dollar (USD) on Wednesday after US Retail Sales ran hotter than markets anticipated.
Canada’s Raw Material Price Index shrank in December for the second month in a row, keeping materials inflation at its steepest contractionary level since last June, while Foreign Investment in Canadian Securities slightly undershot Canadian investment outflows.
Market focus was squarely on US Retail Sales, which jumped much higher than anticipated, making it difficult for investors to continue betting on a faster pace of rate hikes from the Federal Reserve (Fed).
Daily digest market movers: Canadian Dollar firms up, but not enough to overcome Greenback flows
- Canada’s Raw Material Price Index fell 4.9% in December, in-line with the previous figure (revised down from -4.2%) and completely missing the market forecast of -1.6%.
- Canadian Industrial Product Prices also declined in December, falling 1.5% versus the forecast of -0.7% and declining even further from the previous month’s -0.3% (revised down slightly from -0.4%).
- US Retail Sales climbed 0.6% in December, with Retail Sales excluding automobiles also gaining 0.4% over the same period; median market forecasts expected Retail Sales to come in at 0.4% versus the previous 0.3%.
- US Industrial Production grew 0.1% in December, a scant figure but more than the forecasted flat reading of 0.0% and November’s 0.0% (revised down from 0.2%).
- With the US domestic economy continuing to show signs of strength, money markets are pulling away from Fed rate cut bets in frustration, bolstering the US Dollar across the board.
- Crude Oil markets continue to struggle, weakening the Canadian Dollar’s strength base.
- China’s faltering growth outlook early Wednesday pushed Crude Oil lower as barrel traders grow concerned about China’s fossil fuel demand outlook, while a strengthening US Dollar waters down barrel bids.
- Crude Oil markets continue to see upside shocks as geopolitical concerns weigh on investor sentiment, but faltering Crude Oil momentum sees little support transfer to the Loonie.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.03% | -0.32% | 0.15% | 0.59% | 0.63% | 0.49% | 0.35% | |
| EUR | 0.03% | -0.30% | 0.18% | 0.61% | 0.67% | 0.55% | 0.37% | |
| GBP | 0.33% | 0.29% | 0.46% | 0.91% | 0.95% | 0.81% | 0.66% | |
| CAD | -0.15% | -0.18% | -0.48% | 0.43% | 0.49% | 0.34% | 0.18% | |
| AUD | -0.58% | -0.61% | -0.90% | -0.43% | 0.06% | -0.08% | -0.23% | |
| JPY | -0.65% | -0.67% | -0.97% | -0.50% | -0.04% | -0.15% | -0.29% | |
| NZD | -0.49% | -0.53% | -0.82% | -0.35% | 0.09% | 0.14% | -0.15% | |
| CHF | -0.35% | -0.37% | -0.67% | -0.20% | 0.24% | 0.29% | 0.15% |
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).
Technical Analysis: Canadian Dollar struggles to recover after USD/CAD hits 1.3540
The Canadian Dollar (CAD) is down a fifth of a percent against the US Dollar on Wednesday, shedding around half a percent against the Pound Sterling (GBP), while the CAD gained around two-thirds of a percent against the Australian Dollar (AUD) and the Japanese Yen (JPY).
The Canadian Dollar saw further declines against the US Dollar, with the USD/CAD hitting a five-week high of 1.3540. Intraday momentum is leaning into the top side as US Dollar strength continues to push the pair higher. In the near term, the USD/CAD is trading well above the 200-hour Simple Moving Average (SMA) near 1.3400.
Continued bullish momentum in the USD/CAD has the pair challenging a congestion zone that sees the 50-day and 200-day SMAs consolidating near the 1.3500 handle, and the pair has closed close to flat or in the green for all but one of the last 14 consecutive trading days.
USD/CAD Hourly Chart
USD/CAD Daily Chart
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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