Canadian Dollar sees a Monday rebound as market sentiment recovers


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  • Canadian Dollar edging higher as risk appetite takes a chance once more.
  • Canada CPI inflation data due Tuesday for eager CAD traders.
  • Crude Oil easing back for Monday, limiting CAD support.

The Canadian Dollar (CAD) is catching some relief after Friday’s risk-off bids sent the Loonie sharply lower against the US Dollar (USD), and recovery is the name of the game ahead of Tuesday’s Canadian Consumer Price Index (CPI) inflation reading due on Tuesday.

Canadian data isn’t the only action on the economic calendar tomorrow, with US Retail Sales figures due during the American trading session. Markets are anticipating that Canadian CPI will hold flat, and a beat for the datapoint could see inflation expectations increase even further than consumers are already expecting, based on the Bank of Canada’s (BoC) latest Business Outlook Survey. Such a result would also be supportive of CAD.

Daily Digest Market Movers: Canadian Dollar sees Monday gains as new week kicks off

  • Canadian CPI to square up against US Retail Sales Tuesday, investors on the lookout.
  • US Retail Sales seen declining to 0.3% from 0.6%.
  • Canadian CPI inflation forecast to hold steady at 4% for the year into September.
  • BoC’s Outlook Survey sees the majority of Canadian consumers expecting further rate hikes in the next twelve months.
  • Majority of Canadian businesses report negative impacts from monetary policy, and most expect further pain down the road.
  • 55% of Canadians consumers and businesses anticipate a recession sometime next year.
  • Crude Oil is seeing a minor stepback on the charts for Monday, limiting Loonie upside.
  • Canada Retail Sales to close out the trading week, slated for Friday.
  • BoC Survey: Consumers think interest rates will go up over next 12 months

Technical Analysis: Canadian Dollar looking to climb further, sends USD/CAD into 1.3610

The Canadian Dollar (CAD) is seeing a lift as the broad market recovers some risk appetite on Monday, taking the USD/CAD back towards the 1.3600 handle.

The USD/CAD pair opened Monday with bids near 1.3660, easing back towards 1.3600 with the pair currently testing the waters just above 1.3610.

The pair remains down around 1.2% from October’s peak of 1.3785, and the last major swing low on the daily candlesticks is tangled up in the 200-day Simple Moving Average near 1.3450.

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   -0.27% -0.44% -0.22% -0.50% 0.01% -0.38% -0.24%
EUR 0.28%   -0.16% 0.06% -0.21% 0.29% -0.09% 0.01%
GBP 0.44% 0.17%   0.20% -0.06% 0.44% 0.07% 0.20%
CAD 0.23% -0.05% -0.17%   -0.26% 0.24% -0.14% 0.00%
AUD 0.50% 0.23% 0.06% 0.27%   0.50% 0.13% 0.25%
JPY 0.00% -0.25% -0.44% -0.25% -0.50%   -0.38% -0.25%
NZD 0.37% 0.09% -0.07% 0.15% -0.13% 0.38%   0.09%
CHF 0.24% -0.03% -0.20% 0.01% -0.24% 0.26% -0.13%  

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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