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- The Canadian dollar found room to rise, supported by the struggling dollar.
- Canada will provide an update on CPI inflation on Tuesday.
- Risk appetite remains weak as markets await signs of interest rate cuts.
The Canadian Dollar (CAD) found some room to the upside on Monday, falling higher with the US Dollar quietly falling across the board. Investors have little useful information to chew on to start the new trading week, post-departure Market sentiment Adrift.
Canada will provide an update to its Canadian Consumer Price Inflation Index on Tuesday. With the exception of Canada’s gross domestic product (GDP) report coming up on Friday, little else is on the agenda this week, except an appearance by Bank of Canada (BoC) Governor Tiff Macklem on Monday. US dollar traders will also have a long wait for US Durable Goods Orders and the US Personal Consumption Expenditures Price Index, both due for release on Friday.
Daily summary of market drivers: A weak Monday leaves the Canadian dollar drifting higher
- The Canadian dollar rose broadly on Monday, but gains remain minimal. The Canadian dollar rose by one-third of a percent against the US dollar, while it fell by one percent against the euro.
- Tuesday’s Canadian CPI reading will be the key release for Canadian dollar traders this week, with Canadian GDP some way back.
- Canada’s CPI inflation rate is expected to fall to 2.6% from 2.7% for the year ending in May.
- The Bank of Canada’s core Consumer Price Index (CPI) measure of inflation is expected to remain steady at 0.2% per month.
- Broad market focus will be on the inflation reading in the US Personal Consumption Expenditures Price Index on Friday, as investors continue to cling to hopes of a September interest rate cut by the Federal Reserve.
Canadian dollar price today
The table below shows the percentage change in the Canadian Dollar (CAD) against the major currencies listed today. The Canadian dollar was the strongest against the Swiss franc.
| American dollar | euro | GBP | JPY | Bastard – scoundrel | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| American dollar | -0.34% | -0.32% | -0.06% | -0.23% | -0.22% | -0.11% | 0.00% | |
| euro | 0.34% | 0.04% | 0.34% | 0.15% | 0.14% | 0.27% | 0.41% | |
| GBP | 0.32% | -0.04% | 0.24% | 0.11% | 0.10% | 0.24% | 0.38% | |
| JPY | 0.06% | -0.34% | -0.24% | -0.17% | -0.12% | -0.01% | 0.06% | |
| Bastard – scoundrel | 0.23% | -0.15% | -0.11% | 0.17% | 0.03% | 0.13% | 0.28% | |
| Australian dollar | 0.22% | -0.14% | -0.10% | 0.12% | -0.03% | 0.13% | 0.27% | |
| New Zealand dollar | 0.11% | -0.27% | -0.24% | 0.00% | -0.13% | -0.13% | 0.13% | |
| Swiss franc | -0.00% | -0.41% | -0.38% | -0.06% | -0.28% | -0.27% | -0.13% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select 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: The Canadian dollar finds new highs against the weak US dollar on Monday
The Canadian Dollar (CAD) found a bid on Monday as the US Dollar fell to its lower bound. The Canadian dollar continues its recent run of strength against the US dollar, hitting a new three-week high against the US dollar and pulling the USD/CAD towards 1.3650.
US Dollar/Canadian Dollar It closed in the red for all but two of the 10 consecutive trading days, and is on track to expand towards another bearish candle as buy orders drop below the 50-day Exponential Moving Average (EMA) at 1.3675. Long-term technical support lies at the 200-day EMA, which is rising to the 1.3600 handle.
USD/CAD hourly chart
Daily chart of the USD/CAD pair
Frequently asked questions about the Canadian dollar
The main factors that move 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 moving into riskier assets (risk on) or looking for safe havens (risk off) – with risk being positive for the Canadian dollar. As its largest trading partner, the health of the US economy is also a major factor affecting the Canadian dollar.
The Bank of Canada (BoC) has significant influence on the Canadian dollar by setting the level of interest rates that banks can lend to each other. This affects the level of interest rates for everyone. The Bank of Canada’s main goal is to keep inflation at 1-3% by adjusting interest rates up or down. Relatively high interest rates tend to be positive for the Canadian dollar. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD negative and the latter positive.
The price of oil is a major factor affecting the value of the Canadian dollar. Petroleum is Canada’s largest export, so oil prices tend to have an immediate impact on the value of the Canadian dollar. In general, if the price of oil rises, the Canadian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of oil falls. Higher oil prices also tend to increase the likelihood of a positive trade balance, which also supports the Canadian dollar.
While inflation has always been thought to be a negative factor for a currency because it reduces the value of money, the opposite is the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to prompt central banks to raise interest rates, attracting more capital flows from global investors looking for a profitable place to keep their money. This increases the demand for the local currency, which in Canada’s case is the Canadian dollar.
Macroeconomic data releases measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing PMIs, services, employment, and consumer confidence surveys can all influence the direction of the Canadian dollar. A strong economy is good for the Canadian dollar. Not only does it attract more foreign investment, it may encourage the Bank of Canada to raise interest rates, leading to a stronger currency. If economic data is weak, the Canadian dollar will likely fall.
