- Risk appetite in the broader market picks up on Friday as US PCE inflation moderates.
- Canada saw a weaker-than-expected GDP rebound.
- US PCE inflation cooled further, fueling hopes of rate cuts.
He Canadian dollar (CAD) is broadly higher on Friday, but gains are limited after weaker-than-expected Canadian economic data. Investor hopes for a September rate cut are rising after US Personal Consumer Price Index (PCE) inflation moderated faster than expected, and rate markets are back on track. assessing better chances of a rate cut by the Federal Reserve (Fed).
Canada saw a slimmer rebound in quarterly Gross Domestic Product (GDP) growth than markets had anticipated, capping overall gains for the CAD. With US inflation headlines driving broader markets, risk sentiment is on the high side to close the week and investors will be focusing on the Bank of Canada's (BoC) rate decision next week, as well as a series of US Purchasing Managers' Index (PMI) data and another Non-Farm Payrolls report due next Friday.
Market Drivers: Canadian Dollar Buoyed by Rising Tide of Risk Appetite
- Canada's first-quarter GDP rebounded to its strongest growth in a year, rising 1.7% quarter-over-quarter, despite disappointing market forecasts of 2.2%.
- The previous quarter's GDP was also sharply revised downwards to just 0.1% from the initial data of 1.0%.
- US core Personal Consumption Price Index (PCE) inflation rose 0.2% month-on-month in April, below the forecast of 0.3%.
- US personal spending was significantly lower in April, recording 0.2% versus the forecast of 0.3% and further behind the previous 0.7% (revised from 0.8%).
- According to the CME's FedWatch tool, rates markets are now pricing in the odds of at least a quarter-point rate cut by the Fed in September at 56%.
Price of the Canadian Dollar Today
The table below shows the percentage change of the Canadian Dollar (CAD) against the major currencies listed today. The Canadian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.12% | 0.30% | -0.43% | -0.29% | -0.51% | -0.06% | |
| EUR | 0.16% | 0.06% | 0.44% | -0.26% | -0.16% | -0.35% | 0.09% | |
| GBP | 0.12% | -0.06% | 0.40% | -0.32% | -0.20% | -0.41% | 0.03% | |
| JPY | -0.30% | -0.44% | -0.40% | -0.70% | -0.58% | -0.83% | -0.38% | |
| CAD | 0.43% | 0.26% | 0.32% | 0.70% | 0.12% | -0.08% | 0.35% | |
| AUD | 0.29% | 0.16% | 0.20% | 0.58% | -0.12% | -0.22% | 0.21% | |
| NZD | 0.51% | 0.35% | 0.41% | 0.83% | 0.08% | 0.22% | 0.44% | |
| CHF | 0.06% | -0.09% | -0.03% | 0.38% | -0.35% | -0.21% | -0.44% |
The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will represent CAD (base)/USD (quote).
Technical Analysis: Canadian Dollar Overall Higher but Still Stuck in Technical Congestion
The Canadian Dollar (CAD) has gained ground across the board on Friday, rising half a percentage point against the Japanese Yen (JPY). The CAD is also up more than a third of a percentage point against the British Pound (GBP) and the US Dollar (USD) on the day.
USD/CAD has retreated to the 1.3630 region as the pair remains at the lower end of a short-term congestion pattern. Bearish momentum continues to struggle to find territory near 1.3600, but buyers have been unable to drag prices above 1.3750.
USD/CAD Hourly Chart
USD/CAD Daily Chart
Economic Indicator
Personal Consumption Expenditure Price Index – Core (MoM)
The Personal Consumption Expenditure Price Index (PCE), published monthly by the US Bureau of Economic Analysis, measures changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve's (Fed) preferred indicator of inflation. The MoM figure compares the prices of goods in the reference month with the previous month. The core reading excludes the most volatile components of food and energy to give a more accurate measurement of price pressures. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Why is it important for traders?
After releasing the GDP report, the US Bureau of Economic Analysis releases Personal Consumption Expenditures (PCE) Price Index data along with monthly changes in Personal Expenditure and Personal Income. FOMC policymakers use the annual PCE Core Price Index, which excludes volatile food and energy prices, as their main indicator of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible aggressive change in the Fed's future guidance and vice versa.
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.
