- USD/CAD rises near 1.3740 as US Dollar rebounds following positive US data
- US retail sales rose sharply by 1% and initial jobless claims were lower than expected.
- A strong recovery in oil prices continues to boost the Canadian dollar.
The USD/CAD pair makes a vertical bullish move to near 1.3740 in the American session on Thursday as the US Dollar (USD) recovers strongly. The US Dollar rebounds following the release of stronger-than-expected US Retail Sales data for July and lower Initial Jobless Claims for the week ending August 9.
The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, jumps above 103.00. The US retail sales report showed that sales at retail stores rose at a robust 1% pace due to strong demand for automobiles, versus estimates of 0.3%. In June, retail sales contracted 0.2%, revised down from a flat performance.
US Dollar PRICE Today
The table below shows the exchange rate of the US Dollar (USD) against major currencies today. The US Dollar was the strongest currency against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.44% | 0.03% | 1.21% | -0.01% | -0.20% | 0.28% | 0.80% | |
| EUR | -0.44% | -0.41% | 0.74% | -0.44% | -0.72% | -0.32% | 0.35% | |
| GBP | -0.03% | 0.41% | 1.17% | -0.03% | -0.31% | 0.10% | 0.85% | |
| JPY | -1.21% | -0.74% | -1.17% | -1.21% | -1.41% | -1.05% | -0.32% | |
| CAD | 0.00% | 0.44% | 0.03% | 1.21% | -0.20% | 0.13% | 0.88% | |
| AUD | 0.20% | 0.72% | 0.31% | 1.41% | 0.20% | 0.39% | 1.15% | |
| NZD | -0.28% | 0.32% | -0.10% | 1.05% | -0.13% | -0.39% | 0.75% | |
| CHF | -0.80% | -0.35% | -0.85% | 0.32% | -0.88% | -1.15% | -0.75% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent the USD (base)/JPY (quote).
Retail sales are a key measure of household spending that eventually drives consumer inflation. Higher value and volume of sales receipts at retail stores exhibit robust spending by individuals. Positive retail sales have dampened market speculation that the Federal Reserve (Fed) will make a 50 basis points (bps) interest rate cut in September. However, firm market expectations that the Fed will pivot to policy normalization in September remain intact.
Meanwhile, first-time claimants for unemployment benefits were lower at 227,000 versus estimates of 235,000 and the previous release of 234,000, revised up from 233,000.
As for the Canadian Dollar (CAD), positive oil prices continue to act as a major support for the Lonnie. Oil prices have rebounded strongly after a two-day correction on expectations that Fed rate cuts will boost fuel consumption. It is noteworthy that Canada is the leading exporter of oil to the United States and higher oil prices result in significant foreign capital flows into the former.
Canadian Dollar FAQs
The key factors determining 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, 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 include market sentiment, i.e. whether investors are betting on riskier assets (risk-on) or looking for safe assets (risk-off), with 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.
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 generally 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.
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 rises as well, 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.
Although inflation has traditionally always been considered a negative factor for a currency, as it reduces the value of money, the opposite has actually occurred in modern times, with the relaxation of cross-border capital controls. Higher inflation typically leads central banks to raise interest rates, which attracts more capital inflows from global investors looking for a lucrative place to store their money. This increases demand for the local currency, which in Canada’s case is the Canadian dollar.
The released macroeconomic data measures the health of the economy and can 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 can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the 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.
