- Markets recover from the Fed's action on Wednesday.
- On Thursday, Canadian data will be subdued, but BoC Governor Tiff Macklem will make her second appearance.
- The US NFP will be released on Friday, and until then the economic calendar will be subdued.
The Canadian Dollar (CAD) regains ground along with broader markets' risk appetite on Thursday after the US Federal Reserve (Fed) triggered investor tensions in the mid-week market session . S&P Global has changed its rate cut expectations for the year to a single quarter-point cut in December. Consensus on Fed rate cuts is increasingly inconsistent, with CME's FedWatch tool showing rates markets now betting on just a 60% chance of a rate cut in September.
Bank of Canada Governor Tiff Macklem appeared for the second time in two days. The head of the Canadian central bank testified before the Standing Committee on Finance of the House of Commons, along with the deputy governor of the BoC, Carolyn Rodgers. On the other hand, Canada's international merchandise trade balance fell unexpectedly in March, but it had little impact on the markets.
Daily Market Moves Summary: Canadian Dollar Seeks Recovery as BoC Downgrades Rate Cut Expectations
- BoC Governor Macklem:
- Canadian inflation is likely to remain near 2.9% for a few months, thanks to Gas prices.
- The divergence between Canadian and US rates has a limit.
- Even when rates do start to fall, they are likely to do so quite gradually.
- Any potential weakening of the CAD needs to be taken into account when considering interest rate cuts.
- Canada's international merchandise trade fell -2.28 billion in March, compared to the expected improvement of 1.5 billion. The previous month it was sharply revised downwards to 480 million from 1.39 billion.
- US first-quarter unit labor costs rose 4.7% quarter-on-quarter versus 3.2% expected, another thorn in the side of inflation-fearing rate cut hopefuls.
- Friday's US Non-Farm Payrolls (NFP) labor report will be a key reading of the US employment numbers.
- The median market forecast is expecting a print of 243,000 compared to the previous month's 12-month high of 303,000.
Price of the Canadian Dollar today
Below is the percentage change of the Canadian Dollar (CAD) against the main currencies listed for today. The Canadian dollar appreciated against the British pound.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.18% | -0.24% | -0.37% | -1.26% | -0.32% | -0.57% | |
| EUR | 0.00% | 0.18% | -0.25% | -0.37% | -1.23% | -0.32% | -0.55% | |
| GBP | -0.19% | -0.18% | -0.41% | -0.56% | -1.45% | -0.53% | -0.71% | |
| CAD | 0.24% | 0.25% | 0.42% | -0.15% | -1.03% | -0.10% | -0.33% | |
| AUD | 0.36% | 0.38% | 0.55% | 0.14% | -0.89% | 0.03% | -0.16% | |
| JPY | 1.23% | 1.24% | 1.41% | 1.00% | 0.85% | 0.90% | 0.68% | |
| NZD | 0.32% | 0.34% | 0.50% | 0.09% | -0.05% | -0.93% | -0.21% | |
| CHF | 0.54% | 0.55% | 0.72% | 0.30% | 0.17% | -0.75% | 0.22% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen in the left column, while the quote currency is chosen in the top row. For example, if you choose the Euro in the left column and scroll down the horizontal line to the Japanese Yen, the percentage change that appears in the box will represent EUR (base)/JPY (quote).
Technical Outlook: Canadian Dollar Finds Mild Technical Recovery
At the time of writing, the Canadian Dollar (CAD) is up a quarter of a percentage point against the US Dollar (USD) and the Euro (EUR), and four tenths against the British Pound. On the negative side, the CAD fell by a percentage point plus a fifth against the Japanese Yen (JPY), and also lost a third percentage point against the Swiss Franc (CHF).
The USD/CAD pair has fallen below the 200 hourly EMA at 1.3709. The pair is testing chart territory below the 1.3700 level, and is approaching a short-term demand zone between 1.3660 and 1.3630.
Despite closing lower for eight of the last 11 trading days, and set for another lower day on Thursday, USD/CAD is only down a scant 1.08% from the last swing high at 1.3850. The pair continues to trade above the 200-day EMA at 1.3537.
USD/CAD hourly chart
USD/CAD daily chart
Frequently asked questions about interest rates
Interest rates are those charged by financial institutions for the loans they grant to borrowers and those they pay as interest to savers and depositors. They are influenced by basic interest rates, which are set by central banks in response to changes in the economy. Typically, central banks are mandated to ensure price stability, which in most cases means targeting an underlying inflation rate of around 2%. If inflation falls below target, the central bank can cut base interest rates to stimulate credit and boost the economy. If inflation rises substantially above 2%, the central bank typically raises base interest rates to try to reduce inflation.
Higher interest rates generally help strengthen a country's currency by making it a more attractive place for global investors to park their money.
Higher interest rates influence the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or depositing cash in the bank. If interest rates are high, the price of the United States Dollar (USD) usually rises, and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which U.S. banks lend to each other. It is the interest rate that the Federal Reserve sets at meetings of the Federal Open Market Committee (FOMC). It is stated as a range, for example 4.75%-5.00%, although the upper limit (in that case 5.00%) is the figure quoted. Market expectations about the Fed funds rate in the future are tracked by CME's FedWatch tool, which determines the behavior of many financial markets in anticipation of the Federal Reserve's future monetary policy decisions.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
