- Canadian Dollar Moves Lower as Markets Focus on Fed Rate Cuts.
- Canada issued far fewer building permits than expected in March.
- Markets continue to bet on two rate cuts in 2024 despite the Fed's caution.
The Canadian Dollar (CAD) moved within familiar levels on Monday, as a data-light economic calendar kicks off a new trading week. Investors continue to condition their risk appetite on expectations of rate cuts from the Federal Reserve (Fed), with the US inflation data update expected at the end of the week.
Canada saw a larger-than-expected decline in new construction permits issued in March, but data from early in the housing cycle remains low-level and of limited impact. Canadian economic data remains a low priority for the rest of the week, so market participants will focus on the US Producer Price Index (PPI) due out on Tuesday, followed by inflation of the US Consumer Price Index (CPI) and retail sales on Wednesday.
Daily Market Moves Summary: Canadian Dollar Holds Midway as Interest Rate Cut Hopes Prevail
- Canadian building permits issued in March decreased by -11.7%, well below the forecast of -4.6%, the largest monthly decline in building permits since June 2023. April building permits were also revised slightly to the decrease from 9.3% to 8.9%.
- The New York Fed's latest Survey of Consumer Expectations said consumers surveyed expect inflation to rise to 3.3% over the next year, up from 3.0% in the previous survey.
- A Reuters poll of 108 economists showed that nearly two-thirds of respondents still expect a quarter-point cut from the Fed by September, even though none expect inflation to reach the Fed's 2% target before 2026.
- Annual U.S. Producer Price Index inflation is expected to rise to 2.2% on Tuesday, up from 2.1% in the previous period.
- On Wednesday, the US CPI for April is expected to remain stable at 0.4% monthly and the annual figure is expected to decline to 3.4% from 3.5% previously.
Canadian Dollar prices today
Below is the percentage change of the Canadian Dollar (CAD) against the main currencies listed for today. The Canadian Dollar appreciated against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.22% | 0.28% | -0.27% | -0.05% | 0.12% | -0.11% | -0.14% | |
| EUR | -0.22% | 0.11% | -0.49% | -0.25% | -0.07% | -0.31% | -0.34% | |
| GBP | -0.28% | -0.11% | -0.53% | -0.37% | -0.19% | -0.42% | -0.45% | |
| JPY | 0.27% | 0.49% | 0.53% | 0.25% | 0.36% | 0.22% | 0.12% | |
| CAD | 0.05% | 0.25% | 0.37% | -0.25% | 0.14% | -0.05% | -0.00% | |
| AUD | -0.12% | 0.07% | 0.19% | -0.36% | -0.14% | -0.13% | -0.27% | |
| NZD | 0.11% | 0.31% | 0.42% | -0.22% | 0.05% | 0.13% | -0.03% | |
| CHF | 0.14% | 0.34% | 0.45% | -0.12% | 0.00% | 0.27% | 0.03% |
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 Canadian Dollar in the left column and move down the horizontal line to the US Dollar, the percentage change in the box will represent CAD (base)/USD (quote).
Technical Analysis: Canadian Dollar Trades Lower as Markets Steady
The Canadian Dollar (CAD) trades tight on Monday, staying close to the opening bids of the new trading week. The CAD is trading within a quarter of a percentage point against almost all major currencies on Monday and is almost flat against the US Dollar (USD).
USD/CAD is struggling to find momentum on Monday, holding near 1.3680. The pair remains bid just above the short-term supply zone of 1.3660 to 1.3615. Bullish momentum is limited by the 200 hourly EMA just below the 1.3700 area, while short sellers have been unsuccessful in dragging the pair back to 1.3600.
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.
