- The Canadian dollar moves little in a quiet mid-week market.
- Canada offers data of little impact for the rest of the week.
- CAD recovery is supported by crude oil, but doubts in energy markets limit gains.
He Canadian dollar (CAD) trades seesaw on Wednesday as markets continue to digest Tuesday's harsh shift in rate cut expectations after U.S. inflation came in higher than investors expected. Hopes for rate cuts have receded, propping up the US Dollar (USD) and keeping the Canadian Dollar in the red by around three-quarters of a percentage point against the Greenback.
The rest of the week there will be minor economic data releases in Canada, which will likely be overshadowed by the release of US data. Rate cut hopes are based on US inflation cooling at a much faster pace, as well as a general deterioration in US economic health that has so far failed to materialise.
Daily Market Summary: Canadian Dollar Finds Little Momentum on Quiet Wednesday
- The Canadian dollar is moving somewhat normally in the middle of the week, after markets experienced a sharp adjustment following Tuesday's US inflation figures.
- Crude oil markets tested higher on Wednesday, helping to bolster the CAD.
- Another surprise rise in US crude oil values is weighing on barrel bids on Wednesday.
- The Energy Information Administration (EIA) reported that more than 12 million barrels of crude oil were added to U.S. reserves in the week ending February 9.
- This accumulation is in addition to the surplus of 8.52 million barrels that the American Petroleum Institute (API) reported on Tuesday for the same period.
- Housing starts in Canada are forecast to rise slightly for the year through January on Thursday, expected to rise to 235,000 from 249,300.
- On Thursday, markets will focus entirely on US retail sales. January's month-on-month figure is expected to soften to -0.1% from 0.6% in December.
- Initial jobless claims for the week ending February 9 are also on Thursday's agenda, and are expected to show 220,000 new jobless claimants up from 218,000 the previous week.
Quote of the Canadian Dollar today
Below is the percentage change of the Canadian Dollar (CAD) against the currencies listed today. The Canadian dollar appreciated against the pound sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.18% | 0.30% | -0.10% | -0.56% | -0.12% | -0.49% | -0.23% | |
| EUR | 0.19% | 0.49% | 0.09% | -0.36% | 0.06% | -0.28% | -0.03% | |
| GBP | -0.30% | -0.50% | -0.40% | -0.85% | -0.43% | -0.78% | -0.53% | |
| CAD | 0.10% | -0.10% | 0.40% | -0.44% | -0.03% | -0.37% | -0.13% | |
| AUD | 0.54% | 0.36% | 0.85% | 0.44% | 0.41% | 0.07% | 0.31% | |
| JPY | 0.12% | -0.08% | 0.42% | 0.03% | -0.42% | -0.35% | -0.11% | |
| NZD | 0.48% | 0.28% | 0.77% | 0.37% | -0.07% | 0.35% | 0.27% | |
| CHF | 0.22% | 0.03% | 0.51% | 0.12% | -0.32% | 0.09% | -0.26% |
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 in the box will represent EUR (base)/JPY (quote).
Technical Analysis: Canadian Dollar Sees Little Gains on Wednesday
The Canadian Dollar (CAD) is moving between mixed and sideways in Wednesday's market action, seeing only slim gains against the US Dollar of around a tenth of a percent. The Australian dollar (AUD) advanced four tenths against the CAD, while the New Zealand dollar (NZD) fell one third. On Wednesday, the Canadian dollar recorded its best performance against the British pound (GBP), with a rise of around four tenths.
USD/CAD encountered some friction near 1.3550 following Tuesday's rally above the 1.3500 area, but buyers are struggling to push the pair back towards the 1.3600 level. The pair remains above the 200-day simple moving average (SMA) at 1.3478 with Wednesday's low near 1.3530.
USD/CAD hourly chart
USD/CAD Daily Chart
Frequently Asked Questions about the Canadian Dollar
What factors determine the price of the Canadian dollar?
The key factors that determine the price of 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 product, 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 are market confidence, that is, whether investors bet on riskier assets (risk-on) or look for safe assets (risk-off), with the 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.
How do Bank of Canada decisions affect 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 usually 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.
How does the price of oil affect the Canadian dollar?
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 also rises, 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.
How does inflation data influence the value of the Canadian Dollar?
Although inflation has traditionally always been considered a negative factor for a currency, as it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross-border capital controls. Higher inflation often leads central banks to raise interest rates, attracting more capital inflows from global investors looking for a lucrative place to store their money. This increases the demand for the local currency, which in the case of Canada is the Canadian Dollar.
How does economic data influence the value of the Canadian dollar?
The published macroeconomic data measures the health of the economy and may 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 may encourage the Bank of Canada to raise interest rates, resulting in a stronger currency. However, if 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.
