CAD: Currency Index & Volatility

Relative Currency Strength

The first half of the period was spent solely below the baseline, and the Canadian Dollar showed no intentions to increase in value, while outperforming only the Aussie, which decided to lead on the side of the losers already on Thursday. Meanwhile, the same day’s data on Canadian Ivey PMI, which climbed from 58.2 to 62.3 points, failed to provide the Loonie with positive momentum. A well-pronounced advance of the currency began on Friday, following better than anticipated employment statistics from Canada. The CAD Index has immediately returned above zero, and succeeded in retaining its strength for the rest of the June 3-8 period, only except a minor decline that was noticed in the night between Monday and Tuesday.

Helped by busy fundamental data releases’ calendar, the Canadian Dollar could certainly be considered one of the most dynamic currencies during the first week of June. The CAD Index fluctuated all around the baseline for the vast part of the week. While the currency was losing value for three out of five days, it still managed to have a weekly positive change of 0.23%. Among other currencies, the Australian Dollar slumped by 1.42% amid disappointing international trade data, while the Euro continued to hover on the green side, while gaining 1.13% on the weekly basis, therefore under-performing only to the Swedish Krona, which rallied 1.82%.

Volatility

Judging from the data provided by the main volatility chart, it may seem that the Canadian currency stayed quiet during the whole period, and the only exception was Friday. However, the reality proved to be different, and the turbulence indicator has in many cases exceeded the 1.5 mark, even though the main drivers of those fluctuations were located outside Canada. In the meantime, on Friday the benchmark registered its highest score of 5.45 points, when a bunch of fundamentals from North America provoked steep changes on the market. The released data included positive employment changes and decreasing jobless rates both from the world’s 1st and 11th economies, the US and Canada.

The beginning and the end of the analysed time period proved to be significantly more tranquil than in the middle of it on Friday, which still left the overall market volatility quite uplifted. Elevated volatility of the Canadian currency was moderately below the market average at 43% versus 48%, respectively. The EUR/CAD currency cross seemed to be the only one to reach the 50% threshold, while NZD/CAD and CAD/JPY pairs were the least volatile with the portion of elevated volatility at just 30% and 32%, and these two components have driven the overall CAD turbulence below the market mean last week.

Currency Significance

The composite started its most recent period on the negative note and considerably below the historical average level of 0.44. The weakness was caused by the Loonie’s components with the Aussie and Kiwi, which slumped substantially below zero on unexpectedly better than estimated economic growth numbers from Australia. However, a rebound followed shortly, and significance of the Canadian currency hit the weekly highest mark two days later on Friday, as the majority of CAD crosses used to have similar reactions to the crucial employment data. The peak in turn was registered at 0.71 points. However, lack of additional fundamentals on Monday and Tuesday drove the mean correlation coefficient towards its historical average by the end of the period, thus closing it at 0.45 points.

Significance of the Canadian currency, calculated as an average correlation between different CAD crosses, was mixed with lots of ups and downs during the reporting period. Such strong movements were predominantly generated by news from Canada and US, and the composite was swinging in a wide range between 0.71 and 0.16 points. Among the components, the highest correlation coefficient of CAD/EUR pair was observed with CAD/SEK at 0.81. Meanwhile, the composite has been generally staying flat last week, compared with its six-month and yearly averages around 0.42-0.45 points.