USD/CAD Exchange rate
Editors’ Picks
EUR/USD drops to multi-week lows below 1.1050 on USD strength
EUR/USD stays under bearish pressure and trades at a fresh multi-week low below 1.1050 on Thursday. Sustained USD strength despite the worse-than-expected Jobless Claims data weighs on the pair, while rising bets for an ECB rate cut in October undermine the Euro.
GBP/USD trades deep in red near 1.3100 after Bailey's dovish remarks
GBP/USD loses more than 1% on the day and trades at around 1.3100. The pair bears the brunt of the dovish comments from BoE Governor Andrew Bailey, who said that the central bank could become 'more activist' on rate cuts if inflation eases.
Gold fluctuates in a narrow range near $2,650
Gold oscillates in a tight range at around $2,650 after bets fade that the Fed will continue slashing interest rates aggressively. Support for Gold comes from increasing geopolitical risks and lower interest rates globally.
ISM Services PMI Preview: US services sector expected to expand in September
US ISM Services PMI is seen improving a tad in September. The US services sector is expected to remain within the expansionary territory. Investors continue to favour a soft-landing scenario of the US economy.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
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Signatures
USD/CAD, THE “LOONIE”
The USD/CAD tells the trader how many Canadian dollars (the quote currency) are needed to purchase one U.S. dollar (the base currency). This currency pair is known as the "Loonie", a nickname derived from the picture of a loon, a distinctive bird which appears on one side of Canada's gold-coloured, one Dollar coin.
THE IMPORTANCE OF OIL FOR THE LOONIE
The USD/CAD is one of the three so-called “commodity pairs”, together with AUD/USD, NZD/USD, highly correlated to commodity (especially oil) fluctuations.
Canada is commonly known as a resource-based economy being a large producer and supplier of oil. The leading export market for Canada is by far the United States making its currency particularly sensitive to US consumption data and economical health.
FORECAST FOR 2024
The USD/CAD will see diverging central bank policy as a key driver through 2024, and the correlation between the Canadian Dollar and Crude Oil is likely to hold firm through the upcoming trading year. Despite musings in recent years about a shakeout in the Loonie-Crude connection, 2023 saw USD/CAD and West Texas Intermediate (WTI) US Crude Oil moving around the charts in lockstep.
The Canadian economy is expected to run into headwinds through the second half of 2024, coinciding with a global growth slowdown that could hamper Crude Oil prices next year as fossil fuels demand flounders in low-growth or recessionary environments.
ASSETS THAT INFLUENCE USD/CAD THE MOST
- Commodities: oil but also gold and natural gas are to be taken into account.
- Currencies: JPY and EUR. This group also includes: EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD, GBP/JPY and EUR/JPY
- Bonds: CSB (Canada Savings Bonds), CPB (Canada Premium Bond).
- Indices: S&P/TSX Capped Composite Index (the headline index for the Canadian equity market), S&P/TSX Global Gold Index (index of global gold securities) and S&P/TSX Capped Energy Index (benchmarks for related derivative products of Canadian economic sectors).
ORGANIZATIONS, PEOPLE AND ECONOMIC DATA THAT INFLUENCE USD/CAD
In Canada, the organizations and people that affect the most the moves of the USD/CAD pair are:
- Bank of Canada (BoC, Canada’s Central bank) that promotes a safe and sound financial system within tyhe country, issuing statements and deciding on the interest rates of the country. Its president is Tiff Macklem.
- Canadian Government (headed by Justin Trudeau) and its Department of Finance that implement policies that affect the economy of the country.
- CAPP (Canadian Association of Petroleum Producers): Canada being a prominent oil and natural gas producer, the trade organization of that industry is very important.
In the USA, we have:
- The US Government (and its President Joe Biden): events as administration statements, new laws and regulations or fiscal policy can increase or decrease the value of the US Dollar and the currencies traded against it, in this case the Canadian Dollar.
- Fed, the Federal Reserve of the United States whose president is Jerome Powell. The Fed controls the monetary policy, through active duties such as managing interest rates, setting the reserve requirement, and acting as a lender of last resort to the banking sector during times of bank insolvency or financial crisis.
In terms of economic data, we should highlight the Trade Account Balance, a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the USD/CAD. If a steady demand in exchange for CAD exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the CAD.
Inflation is another economic value that is important for the USD/CAD pair. It is measured among others by the CPI (Consumer Price Index) and the PPI (Production Price Index). They are key indicators to measure inflation and changes in purchasing trends.