- The US dollar strengthens and the Canadian dollar extends its losses.
- The mixed US PPI numbers fail to fully offset the risk-averse reaction sparked by Wednesday's CPI numbers.
- USD/CAD continues to rise, 1.3740 and 1.3770 on the bulls' radar.
The Canadian Dollar (CAD) is selling off for the second day in a row on Thursday. The Canadian dollar has depreciated more than 1% in the last two trading days, while the US dollar generally appreciates, as investors lower hopes that the Federal Reserve (Fed) will ease its monetary policy by 2024 .
The US Producer Price Index (PPI) has returned mixed data, with headline numbers accelerating below expectations but still delivering above-expected core inflation. These figures have provided some relief, but they do not compensate for the feeling of risk aversion caused by the high Consumer Price Index (CPI) figures published on Wednesday.
Richmond Fed President Thomas Barkin has questioned whether there is a turnaround in inflation and has asked for more time to start cutting rates. The president of the New York Fed, John Williams, has shown a more moderate profile, stating that it will be necessary to cut rates, but that a rise is not foreseen at the moment. Later, the Fed's Collins and Bostic will meet with reporters.
Daily Market Moves Summary: USD/CAD Continues Rising as Fed Cut Hopes Dim
- The Canadian dollar falls to five-month lows on Thursday, on track for its worst weekly result since November.
- The US PPI slowed to 0.2% in March, from 0.6% in February, although the annual rate rebounded to 2.1% from 1.6% the previous month. The core PPI accelerated to an annual rate of 2.4% from 2.1% in February, above expectations for a reading of 2.3%.
- On Wednesday, US CPI inflation accelerated to a pace of 0.4% in March and 3.5% annually, beating expectations of 0.3% and 3.2%, respectively. Risk aversion sent yields and the US dollar soaring.
- The 10-year US Treasury yield has surpassed the key 4.5% level for the first time this year. The 2-year bond yield has risen about 40 basis points in three days to test the 5% level.
- On Wednesday, the BoC kept interest rates unchanged at 5%, but Governor Tiff Macklem revealed that the committee discussed the possibility of cutting rates, adding negative pressure to the CAD.
- Futures markets' bets on Fed rate cuts in June have fallen to 20% from levels above 50% ahead of the US CPI report, according to CME Group's FedWatch tool.
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Price of the Canadian Dollar today
The following table shows the percentage variation of the Canadian Dollar (CAD) against the main currencies listed today. The Canadian dollar was the weakest currency against the Swiss franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.22% | 0.03% | 0.12% | -0.25% | 0.18% | -0.13% | -0.26% | |
| EUR | -0.22% | -0.21% | -0.09% | -0.47% | -0.05% | -0.35% | -0.48% | |
| GBP | -0.03% | 0.19% | 0.09% | -0.28% | 0.13% | -0.17% | -0.30% | |
| CAD | -0.12% | 0.10% | -0.08% | -0.36% | 0.07% | -0.22% | -0.40% | |
| AUD | 0.22% | 0.44% | 0.26% | 0.34% | 0.40% | 0.11% | -0.02% | |
| JPY | -0.17% | 0.06% | -0.15% | -0.07% | -0.42% | -0.31% | -0.43% | |
| NZD | 0.13% | 0.35% | 0.16% | 0.24% | -0.12% | 0.29% | -0.14% | |
| CHF | 0.26% | 0.47% | 0.31% | 0.39% | 0.02% | 0.44% | 0.17% |
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: USD/CAD breaks above channel ceiling, next resistance at 1.3740
The US dollar has broken above the top of the channel of the last two months, as strong US inflation data has dampened hopes of a rate cut in June. The bulls have taken control and extended their rise beyond 1.3700, with no signs of a bearish reversal in sight.
The inverse trend line has served as support, confirming the bullish trend. The next upside targets are 1.3740 and 1.3770. The measured target of the broken channel is the mid-November high at 1.3845. Supports are the top of the mentioned channel, 1.3660 and 1.3545.
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.
