Canadian Dollar soft on Friday as markets look elsewhere
- The Canadian Dollar eased across the board on Friday.
- Canada sees only mid-tier data looking forward.
- CAD set to end a second week down against the Greenback.
The Canadian Dollar (CAD) found little support on Friday, easing back against most of its major currency peers as global markets focus on US inflation figures. Investors continue to hinge overall sentiment on whether or not the Federal Reserve will (Fed) deliver a September rate trim, which at current cut is fully priced into markets.
The Bank of Canada (BoC) has delivered two quarter-point rate cuts in 2024, and CAD traders will essentially be on pause until more meaningful Canadian economic data crosses the calendar. It’s a long wait until Canadian inflation data in the back half of August, with the scope showing only mid-tier data until then.
Daily digest market movers: CAD eases as investors grapple with key US inflation data
- Canadian Dollar continues to swim in circles as CAD traders lose interest.
- US Personal Consumption Expenditures Price Index (PCE) inflation failed to meet expectations.
- Investors remain undeterred, still see 100% odds of a September rate cut from the Fed.
- Core US PCE inflation for the year ended June held at 2.6% YoY, flouting the median market forecasts of a tick down to 2.5%.
- The University of Michigan (UoM) Consumer Sentiment Index fell less than expected to 66.4 versus the forecast 66.0, but still down from the previous 68.2.
- Investors are shrugging off another uptick in UoM 5-year Consumer Inflation Expectations for July, which ticked up to 3.0% from the previous 2.9%.
- Coming up next week: Mid-tier Canadian Gross Domestic Product (GDP) on Tuesday and another go around the US Nonfarm Payrolls (NFP) wheel. Both figures are currently expected to ease lower.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.17% | -0.12% | 0.00% | -0.36% | -0.17% | 0.18% | |
| EUR | 0.16% | -0.01% | 0.05% | 0.18% | -0.21% | 0.02% | 0.33% | |
| GBP | 0.17% | 0.01% | 0.06% | 0.19% | -0.20% | 0.02% | 0.34% | |
| JPY | 0.12% | -0.05% | -0.06% | 0.12% | -0.22% | -0.04% | 0.30% | |
| CAD | -0.01% | -0.18% | -0.19% | -0.12% | -0.37% | -0.18% | 0.16% | |
| AUD | 0.36% | 0.21% | 0.20% | 0.22% | 0.37% | 0.21% | 0.56% | |
| NZD | 0.17% | -0.02% | -0.02% | 0.04% | 0.18% | -0.21% | 0.32% | |
| CHF | -0.18% | -0.33% | -0.34% | -0.30% | -0.16% | -0.56% | -0.32% |
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).
Technical analysis: CAD struggles to find momentum on Friday
The Canadian Dollar (CAD) is overall softer heading through the final trading session of the week. Markets are relatively lopsided, with the CAD struggling to hold flat against the Greenback while declining against the Euro and the Pound Sterling. The CAD is down one-third of one percent against the Aussie but gained one-quarter of one percent against the Swiss Franc.
USD/CAD is set to close a second straight week in the green as the Canadian Dollar struggles to find a foothold against the US Dollar. The pair has closed green for seven consecutive trading days, and a breather in one-way price action on Friday still leaves intraday price action stuck at the top end of a supply zone prices in above 1.3750.
The pair has extended a mid-month bullish bounce from the 200-day Exponential Moving Average (EMA) at 1.2613. Near-term technical levels are a risk of pivoting from resistance into support around 1.3750, and a bearish pullback will have to contend with the 50-day EMA rising into 1.3700.
USD/CAD daily chart
Canadian Dollar FAQs
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.
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.
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.
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.
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.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
