- The Canadian dollar moved in both directions on a quiet Monday.
- Canada has another rate decision looming on Wednesday.
- A tepid start to the trading week leaves CAD traders waiting.
The Canadian Dollar (CAD) remained sideways on Monday, finding some gains against the Antipodean but losing more weight against the US Dollar. CAD traders are bracing for the long wait until Wednesday’s Bank of Canada (BoC) rate decision, with a light economic calendar for the first half of the trading week.
The Bank of Canada is widely expected to begin delivering a series of rate cuts this week as the Canadian central bank brushes aside a recent spike in major inflation gauges and bows to financial markets and advocates for the housing industry, an industry that accounts for an outsized share of the Canadian economy. Record-high home prices are already constraining economic activity as Canada struggles under the weight of housing and shelter costs that have far outstripped median incomes.
Market Moves in Daily Wrap: BoC Rate Cut Takes Center Stage for CAD Traders
- The BoC is widely expected to deliver another quarter-point cut in July after an initial cut in June.
- Markets will be watching BoC Governor Tiff Macklem’s press conference after the rate decision to try to figure out how many more cuts the BoC might be willing to deliver in 2024.
- Rate markets are broadly pricing in around 65 basis points more in cuts through December.
- Market flows are tilted in favor of the Dollar on Monday, giving the USD a firm advantage.
- Key US activity and inflation figures are due later this week. After a stellar run in rate cut expectations the previous week, markets may be cautious going into the release window.
Canadian Dollar PRICE Today
The table below shows the exchange rate of the Canadian Dollar (CAD) against major currencies today. The Canadian Dollar was the strongest currency against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.04% | -0.17% | 0.23% | 0.69% | 0.69% | 0.22% | |
| EUR | 0.03% | -0.01% | -0.19% | 0.21% | 0.76% | 0.67% | 0.18% | |
| GBP | 0.04% | 0.01% | -0.28% | 0.21% | 0.77% | 0.67% | 0.18% | |
| JPY | 0.17% | 0.19% | 0.28% | 0.44% | 0.94% | 0.84% | 0.34% | |
| CAD | -0.23% | -0.21% | -0.21% | -0.44% | 0.55% | 0.47% | -0.02% | |
| AUD | -0.69% | -0.76% | -0.77% | -0.94% | -0.55% | -0.09% | -0.59% | |
| NZD | -0.69% | -0.67% | -0.67% | -0.84% | -0.47% | 0.09% | -0.45% | |
| CHF | -0.22% | -0.18% | -0.18% | -0.34% | 0.02% | 0.59% | 0.45% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected 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 chart will represent the CAD (base)/USD (quote).
Technical Analysis: Canadian Dollar Boosted by Antipodes but Losing Ground Against the Greenback
The Canadian Dollar (CAD) was functionally directionless on Monday, pushed by broader market flows. The CAD gained around half a percentage point against the Australian Dollar (AUD) and New Zealand Dollar (NZD) as the Antipodeans fell broadly. A bid for the Dollar on Monday saw the CAD lose about a third of a percentage point against the US Dollar.
USD/CAD continues to advance towards 1.3800, and the pair is on track to close Monday in the green after an early attempt towards the 1.3700 area. The pair has closed higher on all but one of the past seven consecutive trading days, and is set to mark day number eight as bidders battle it out with 1.3750.
The daily candlesticks found bullish support at the 200-day exponential moving average (EMA) at 1.3597 after a drop below 1.3600 in mid-July. Despite a firm bullish recovery, the bid action is running into a valued supply zone just above 1.3750.
USD/CAD Hourly Chart
USD/CAD Daily Chart
The Canadian Dollar
The key factors determining the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of oil, Canada’s main export, the health of its economy, inflation and the trade balance, which is the difference between the value of Canadian exports and its imports. Other factors include market sentiment, i.e. whether investors are betting on riskier assets (risk-on) or looking for safe assets (risk-off), with risk-on being positive for the CAD. 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) exerts significant influence over the Canadian dollar by setting the level of interest rates that banks can lend to each other. This influences the level of interest rates for everyone. The BoC’s main objective is to keep inflation between 1% and 3% by adjusting interest rates up or down. Relatively high interest rates are generally positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former being negative for the CAD and the latter being positive for the CAD.
The price of oil is a key factor influencing the value of the Canadian dollar. Oil is Canada’s largest export, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD rises as well, as aggregate demand for the currency increases. The opposite occurs if the price of oil falls. Higher oil prices also tend to lead to a higher probability of a positive trade balance, which also supports the CAD.
Although inflation has traditionally always been considered a negative factor for a currency, as it reduces the value of money, the opposite has actually occurred in modern times, with the relaxation of cross-border capital controls. Higher inflation typically leads central banks to raise interest rates, which attracts more capital inflows from global investors looking for a lucrative place to store their money. This increases demand for the local currency, which in Canada’s case is the Canadian dollar.
The released macroeconomic data measures 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 confidence surveys can 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 can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
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.
