- The Canadian dollar trades higher against the US dollar on Thursday.
- Canada’s Ivey PMI beat expectations, giving the Loonie some much-needed support.
- US jobs data also beat forecasts and markets will focus on the next drop in NFP data.
He Canadian dollar (CAD) is finding much-needed support in Thursday trading, trading with the US dollar (USD) after both currencies strengthened following the publication of economic data that exceeded expectations.
In Canada, the seasonally adjusted Purchasing Managers’ Index (PMI) for September far exceeded expectations. In the US, initial jobless claims for the week of September 29 exceeded expectations, and non-farm payrolls will be released on Friday, promising great volatility as currency markets remain closely watched. US Dollar flows. US NFP for September is expected to decline from 187,000 to 170,000.
Daily Market Movement Summary: Canadian Dollar Steady, Pressure on US Dollar Easing
- USD/CAD cycled Thursday’s opening bids near 1.3743.
- Canadian PMIs beat expectations, supporting the CAD.
- US jobless claims also exceeded expectations, hampering the CAD’s upside potential during the day.
- Canadian jobs numbers are due out on Friday, and market analysts expect the unemployment rate to hold steady at 5.6% for September.
- The overall net change in employment in Canada fell from 49,900 to 20,000.
- US NFP looms, market flows will turn firmly towards the USD side to close the trading week.
- US wage figures are expected to rise 0.2% to 0.3% in September.
- The battle over rate hike expectations is not over yet, and currency market participants will be keeping an eye on next week’s Federal Open Market Committee (FOMC) minutes, due to be released on Wednesday.
- Crude oil prices continue to falter as global supply concerns ease, further denting the CAD’s bullish momentum.
- The Canadian PMI came in at 53.1, versus the forecast of 50.8, with a slight drop from the previous 53.5.
- Initial claims for unemployment benefits in the US stood at 207,000, compared to the 210,000 expected. The number of new jobless claims continues to rise from 205,000 the previous week (revised upward from 204,000).
Technical Analysis: Canadian Dollar Trades Against Dollar, USD Holds Firm
The Canadian Dollar (CAD) is wavering against the US Dollar (USD) for Thursday, trading near the day’s opening prices near 1.3740. The USD/CAD pair hit lows in early trading on Thursday near 1.3710 before bouncing back to seven-month highs at 1.3785, but the dollar’s momentum could not be sustained and the pair settled back into the middle zone.
Swing points continue to mark highs for USD/CAD, but the pair looks set to begin a tentative consolidation pattern as investors try to pick a direction going forward. The recent lows have created a technical support zone between 1.3700 and 1.3720, with the 100-day SMA at 1.3680.
Frequently Asked Questions about the Canadian Dollar
What factors determine the price of the Canadian dollar?
The key factors driving 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, the health of its economy, inflation and trade balance, which is the difference between the value of Canada’s exports versus its imports. Other factors are market sentiment, that is, whether investors bet on riskier assets (risk appetite) or look 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, reducing 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.
