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Canadian Dollar holds steady despite solid trade data, higher Oil prices

  • The Canadian Dollar fails to benefit from stronger-than-expected trade data released for May.
  • The US Dollar remains supported by Fed policy expectations and persistent geopolitical tensions.
  • Markets now await the Federal Reserve meeting minutes for fresh clues on the interest rate outlook.

USD/CAD trades around 1.4205 on Tuesday at the time of writing, virtually unchanged on the day, as investors balance encouraging Canadian economic data against a US Dollar (USD) that remains supported by monetary policy expectations and ongoing geopolitical tensions.

Canada released stronger-than-expected trade figures. Merchandise exports rose 0.9% in May, while imports edged down 0.2%, allowing the trade surplus to widen to CAD$4.24B from an upwardly revised CAD$3.41B in April. This marks Canada's third consecutive monthly trade surplus. Meanwhile, the Ivey Purchasing Managers Index (PMI) eased to 59.7 from 61.3 but remained firmly in expansion territory, signalling that economic activity continues to grow.

Despite the upbeat domestic data, the Canadian Dollar (CAD) struggles to gain traction, although higher Oil prices are providing some support. West Texas Intermediate (WTI) US Oil is up 2.47% for the day at the time of press, trading around $70.30 per barrel after renewed tensions near the Strait of Hormuz following attacks on commercial vessels. As a major Oil exporter, Canada generally benefits from stronger energy prices.

In the United States (US), the latest labor market data continues to point to a gradual slowdown in hiring. The four-week average of the ADP Employment Change declined to 21K from 24.25K, following June's weaker-than-expected Nonfarm Payrolls (NFP) report. However, the figures have done little to alter expectations that the Federal Reserve (Fed) will maintain a restrictive monetary policy stance.

New York Fed President John Williams said monetary policy is "in a good place," while noting that inflation remains too high and risks to the labor market are broadly balanced. According to the CME FedWatch tool, markets see a 75% chance that the Fed will leave interest rates unchanged at its July meeting, while expectations for a September rate hike have eased slightly.

Scotiabank analysts believe the Canadian Dollar is currently trading close to its fair value, although they note that the US Dollar remains overbought. Meanwhile, RBC, Societe Generale and NBC all argue that the Canadian Dollar's near-term upside remains limited despite gradually improving domestic fundamentals.

Investors are now focused on the release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday, which could provide fresh insight into the Fed's policy outlook and help determine the next direction for both the US Dollar and the USD/CAD pair.

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 New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.10%0.16%-0.10%0.01%0.21%0.23%0.14%
EUR-0.10%0.04%-0.20%-0.10%0.12%0.14%0.03%
GBP-0.16%-0.04%-0.24%-0.13%0.08%0.10%0.00%
JPY0.10%0.20%0.24%0.12%0.32%0.33%0.24%
CAD-0.01%0.10%0.13%-0.12%0.19%0.24%0.13%
AUD-0.21%-0.12%-0.08%-0.32%-0.19%0.02%-0.08%
NZD-0.23%-0.14%-0.10%-0.33%-0.24%-0.02%-0.10%
CHF-0.14%-0.03%0.00%-0.24%-0.13%0.08%0.10%

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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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