- The Canadian dollar remains awaiting the Fed's appearance.
- The Canadian PMI did not reach the expected level, with little impact.
- US job progress is a worrying indicator for Friday's NFP.
He Canadian dollar (CAD) remains sideways in Wednesday's session, while the markets await the statement from the US Federal Reserve. Investors have been betting on a rate hold from the US central bank, but markets expect stronger policy guidance from the Fed as inflation continues to weigh on rate cut hopes.
Canada posted a slight decline in its S&P Global Manufacturing Purchasing Managers' Index early in the American session, but market momentum remains tepid. US data will feature prominently in the mid-week session, with the Non-Farm Payrolls (NFP) release later in the week on Friday.
Daily summary of market movements: The Fed in the spotlight
- The April Canadian Manufacturing PMI fell to 49.4 from 49.8 previously, missing the forecast for an improvement to 50.2.
- The US ISM Manufacturing PMI also fell to 49.2 from 50.3 the previous month, missing the forecast of 50.0.
- The April ADP (employment change) stood at 192,000 jobs, slightly below the previous 208,000 (revised upward from 184,000), but above the 175,000 forecast.
- The Fed is generally expected to hold rates on Wednesday, but investors are hoping for signs that the Fed will lean on rates sooner rather than later.
- Jobs numbers could dash rate cut hopes as Friday's US NFP jobs data closes out the trading week.
Below is the percentage change of the Canadian Dollar (CAD) against the main currencies listed today. The Canadian dollar was the weakest currency against the New Zealand dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.08% | 0.08% | -0.08% | -0.23% | -0.05% | -0.33% | 0.05% | |
| EUR | 0.07% | 0.15% | 0.01% | -0.15% | 0.03% | -0.25% | 0.12% | |
| GBP | -0.08% | -0.15% | -0.16% | -0.30% | -0.13% | -0.41% | -0.03% | |
| CAD | 0.08% | -0.03% | 0.16% | -0.15% | 0.02% | -0.25% | 0.13% | |
| AUD | 0.23% | 0.14% | 0.30% | 0.14% | 0.16% | -0.10% | 0.27% | |
| JPY | 0.06% | -0.03% | 0.11% | -0.03% | -0.18% | -0.27% | 0.11% | |
| NZD | 0.33% | 0.25% | 0.40% | 0.25% | 0.10% | 0.28% | 0.37% | |
| CHF | -0.06% | -0.14% | 0.02% | -0.14% | -0.28% | -0.15% | -0.38% |
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 Analysis: Canadian Dollar Mixed as Markets Focus on Other Currencies
The Canadian dollar (CAD) is trading strongly on Wednesday, gaining around a tenth against the US dollar (USD) ahead of the Fed's latest meeting. Against the New Zealand dollar (NZD), the currency that performed best in the early hours On Wednesday, the CAD fell by a quarter of a percentage point.
The USD/CAD pair has retreated slightly from a short-term high around 1.3780, with an immediate technical bottom in the 1.3700 area. The 200 hourly EMA also offers technical support from 1.3707.
USD/CAD remains on the bullish side of the chart despite short-term pullbacks from the latest swing high at 1.3850, with the pair trading at the top of the 200-day EMA at 1.3533. The Dollar is up 4.4% against the CAD from the December low at 1.3175.
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.
