Canadian Dollar pares away gains on Thursday

Source Fxstreet
Jun 13, 2024 16:21
  • Canadian Dollar sheds -0.20% against USD as price action rebounds.
  • Canada remains absent from the economic calendar on Thursday.
  • BoC Governor Macklem due to speak at event, policy comments expected.

The Canadian Dollar (CAD) pared back recent gains against the US Dollar (USD) on Thursday, shedding a quarter of a percent against the USD as market flows pull back to safety and bolster the Greenback. US economic data broadly printed worse than expected on Thursday, driving investors back into safe havens.

Canada brings strictly low-tier economic calendar events this week, leaving CAD flows at the mercy of broader market sentiment. However, Bank of Canada (BoC) Governor Tiff Macklem is scheduled to speak at an event later on Thursday, and CAD traders will be looking for any updates on the Canadian central bank’s policy stance.

Daily digest market movers: Greenback flows reverse bullish CAD momentum

  • US data missed expectations across the board on Thursday, sparking moderate safe haven bids.
  • US Initial Jobless Claims for the week ended June 7 jumped to 242K, above the forecast 225K and the previous week’s 229K.
  • US Producer Price Index (PPI) in May contracted -0.2%, missing the forecast of 0.1% and declining further from the previous 0.5%.
  • Core US PPI (PPI excluding volatile food and energy prices) ticked down to 2.3% YoY versus the forecast hold at 2.4%.
  • BoC Governor Macklem due to participate in a fireside chat at the Bank of International Settlements’ Innovation Hub Center in Toronto. CAD traders will be keeping an ear out for any statements about the BoC’s expectations of further rate cuts in the future.
     

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 Euro.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   0.60% 0.39% 0.06% 0.26% 0.53% 0.38% -0.02%
EUR -0.60%   -0.20% -0.52% -0.34% -0.07% -0.22% -0.61%
GBP -0.39% 0.20%   -0.32% -0.13% 0.15% -0.03% -0.40%
JPY -0.06% 0.52% 0.32%   0.19% 0.47% 0.28% -0.08%
CAD -0.26% 0.34% 0.13% -0.19%   0.27% 0.12% -0.26%
AUD -0.53% 0.07% -0.15% -0.47% -0.27%   -0.17% -0.55%
NZD -0.38% 0.22% 0.03% -0.28% -0.12% 0.17%   -0.37%
CHF 0.02% 0.61% 0.40% 0.08% 0.26% 0.55% 0.37%  

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 walks back gains against Greenback, but remains mixed overall

The Canadian Dollar (CAD) is mixed overall on Thursday, shedding weight against the US Dollar but gaining ground against the Euro (EUR). The CAD is down a third of a percent against the Swiss Franc (CHF), but gained three-tenths of one percent against the Euro, Thursday’s worst-performing major currency.

USD/CAD has risen above 1.3750 as the Greenback climbs over the CAD, dragging the pair higher but still falling on the short side of the week’s peak bids near 1.3790. Bidders are making a fresh push to try and recapture the 1.3800 handle, while short positions will accumulate in an attempt to drag USD/CAD back down to the 50-day Exponential Moving Average (EMA) at 1.3668.
 

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.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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