- The Canadian dollar advances while the markets favor the dollar.
- Not much data will be released in Canada this week.
- PPI and US Retail Sales will be released tomorrow.
The Canadian Dollar (CAD) is getting a bid thanks to a missed forecast in the US Consumer Price Index (CPI) inflation numbers. The lack of data is sending broader markets into appetite mode as market sentiment improves.
The US CPI for October was below the markets’ initial forecasts, and the falling inflation data is giving the markets reason to hope that the Federal Reserve’s (Fed) speech on interest rates “more “highs for longer” may not be as long as previously thought.
Daily summary of market movements: Canadian dollar rebounds driven by CPI
- The Canadian dollar hits five-day highs and its highest bids in a week thanks to the drop in the US CPI.
- October’s month-on-month CPI stood at 0.0%, compared to 0.1% expected and 0.4% previously.
- The annualized CPI stood at 3.2%, down from 3.7% previously and below the forecast of 3.3%.
- CPI expectations are one of the forecasts that markets are anxious to have missed, as risk appetite increases.
- Cooling inflation faster than expected is helping investors return to riskier assets, including the Loonie.
- Important US data will be released this week, including the Producer Price Index (PPI) and retail sales for October, which will arrive on Wednesday.
Technical Analysis: Canadian Dollar Moves Towards 1.37 Against US Dollar as Markets Shift Towards Risk Appetite
The Canadian Dollar (CAD) is heading back towards the 1.3700 area against the US Dollar (USD), bringing the USD/CAD pair back from Friday’s 1.3850 level.
Short positions in USD/CAD will look to drag the pair back towards the 50-day SMA near 1.3650. Long-term support lies at the 200-day SMA, which currently sits at the high of 1.3500.
Tuesday’s pullback on the USD/CAD chart is helping to consolidate a potential lower high chart pattern, with a technical resistance zone extending from 1.3750 to 1.3800. Meanwhile, USD bulls expect a rebound from the ascending trend line drawn from the July low at 1.3100.
USD/CAD Daily Chart
Current rate of the Canadian dollar
Below is the percentage change of the Canadian Dollar (CAD) against the currencies listed today. The Canadian dollar was the strongest currency against the US dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.50% | -1.68% | -0.63% | -1.78% | -0.57% | -1.77% | -1.21% | |
| EUR | 1.48% | -0.17% | 0.86% | -0.27% | 0.93% | -0.26% | 0.30% | |
| GBP | 1.65% | 0.17% | 1.01% | -0.11% | 1.06% | -0.10% | 0.46% | |
| CAD | 0.63% | -0.85% | -1.00% | -1.13% | 0.05% | -1.12% | -0.54% | |
| AUD | 1.75% | 0.28% | 0.10% | 1.12% | 1.17% | 0.01% | 0.57% | |
| JPY | 0.59% | -0.91% | -1.07% | -0.05% | -1.19% | -1.16% | -0.62% | |
| NZD | 1.74% | 0.26% | 0.10% | 1.13% | 0.00% | 1.19% | 0.56% | |
| CHF | 1.19% | -0.29% | -0.45% | 0.56% | -0.57% | 0.62% | -0.56% |
The 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).
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 largest 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 sentiment, that is, whether investors are betting on riskier assets (risk appetite) or looking for safe havens (risk aversion), with risk appetite being positive for the CAD. As a major trading partner, the health of the US economy is also a key factor influencing the Canadian dollar.
How do the decisions of the Bank of Canada influence the Canadian dollar?
The Bank of Canada (BoC) significantly influences 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 higher 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 first being negative for the CAD and the second being positive for the CAD.
How does the price of oil influence 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 result in a higher probability of a positive trade balance, which is also support for 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. Inflation tends to lead central banks to raise interest rates, which attracts more capital from investors around the world 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?
Macroeconomic data releases measure the health of the economy and can influence the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer sentiment 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.
