Canadian Dollar backpedals after US NFP drives markets
- Canadian Dollar falls across the board on Friday.
- Canada absent from economic calendar until next Tuesday.
- US data broadly misses the mark, particularly in terms of job gains.
The Canadian Dollar (CAD) fell across the board on Friday after US Nonfarm Payrolls (NFP) and wage data gave a wide miss on forecasts, sending the Canadian Dollar into the low end after an early spark. The US’ ISM Services Purchasing Managers Index (PMI) also fell back into contraction territory for the first time since January of 2023.
Canada has no meaningful economic data until next Tuesday’s Ivey PMIs, leaving the Canadian Dollar at the mercy of broader markets on Friday. With bad data from the US dragging down investor appetite for the Canadian Dollar, the CAD is getting battered, falling against all of its major currency peers. Crude Oil prices are also weakening on Friday, dragging the CAD even lower.
Daily digest market movers: US NFP misses mark, inflation uptick hammers CAD appetite
- US NFP shows net job additions of 175K in April, down from the forecast for 243K. The previous month saw an upside revision to 315K from 303K.
- US Average Hourly Earnings also grew 0.2% MoM in April, falling below the forecast of 0.3%.
- The US Unemployment Rate also ticked higher to 3.9% from the previous 3.8%.
- US ISM Services PMI unexpectedly fell below the 50.0 contraction level for the first time in over a year, declining to 49.4 when market forecasts were calling for a slight increase to 52.0 from the previous month’s 51.4.
- ISM Services Priced Paid accelerated to 59.2 from 53.4, keeping inflation fears close to the surface.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.33% | -0.05% | 0.09% | -0.62% | -0.16% | -0.84% | -0.59% | |
| EUR | 0.34% | 0.30% | 0.43% | -0.27% | 0.21% | -0.48% | -0.24% | |
| GBP | 0.04% | -0.29% | 0.14% | -0.57% | -0.11% | -0.79% | -0.51% | |
| CAD | -0.09% | -0.43% | -0.11% | -0.68% | -0.24% | -0.92% | -0.65% | |
| AUD | 0.62% | 0.27% | 0.57% | 0.70% | 0.47% | -0.21% | 0.03% | |
| JPY | 0.15% | -0.19% | 0.10% | 0.21% | -0.47% | -0.66% | -0.44% | |
| NZD | 0.82% | 0.47% | 0.78% | 0.92% | 0.22% | 0.67% | 0.25% | |
| CHF | 0.57% | 0.24% | 0.52% | 0.65% | -0.05% | 0.43% | -0.27% |
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 broadly softens on Friday as investors disinterested
The Canadian Dollar (CAD) slumped across the board on Friday, easing around a tenth of a percent against the US Dollar (USD) despite a bullish start to the day. A broad-market recovery for the New Zealand Dollar (NZD) sees the CAD shed a full percent against the Antipodean currency, with an additional eighth of a percent falling to the Australian Dollar (AUD). The CAD is also down around half of a percent against the Euro (EUR).
USD/CAD rallied to the top end of a recent demand zone between 1.3680 and 1.3630 after a quick descent Friday morning into 1.3610. The pair’s downside run proved to be short-lived, and bids are back to challenging chart territory near 1.3700.
USD/CAD hourly chart
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.
