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Discover the Latest on the Canadian Dollar: A Slight Ease and CPI in the Barrel

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  • Canadian Dollar pares back some of last Friday’s gains ahead of Canadian CPI on Tuesday.
  • Monday’s economic calendar has a thin docket, but key data to wrap up 2023 due this week.
  • CAD and crude Oil diverge as WTI recovers some ground on Monday.

The Canadian Dollar (CAD) is pulling back in the bids to kick off the last two weeks of trading in 2023, with a final print of StatsCAN’s Canadian Consumer Price Index (CPI) inflation on the docket for Tuesday. 

On top of muddying the waters by reporting its own version of Canadian CPI on Tuesday, the Bank of Canada (BoC) will publish its latest Summary of Deliberations on Wednesday. Thursday’s Canadian Retail Sales and Friday’s Canadian Gross Domestic Product (GDP) will be overshadowed by counterpart US data punching in a higher weight class.

Daily Digest Market Movers: Canadian Dollar markets coil ahead of 2023’s final inflation print

  • Monday opens quietly heading into the final turn of the trading year.
  • The CAD is paring back slightly on Monday, falling or flattening against nearly all other major currencies.
  • The Loonie slipped a tenth of a percent against the US Dollar (USD) but climbed four-tenths of one percent against the Japanese Yen (JPY) as the Yen outpaced the Canadian Dollar to be the weakest currency in Monday trading.
  • Canadian Consumer Price Index inflation on Tuesday is expected to show further cooling in consumer-facing prices, with the YoY figure forecast to tick down from 3.1% to 2.9%. November’s MoM CPI is also expected to see a return to cooling territory, slated to fall to -0.2% from October’s 0.1%.
  • The BoC’s Summary of Deliberations is due on Wednesday but is unlikely to reveal much new information that wasn’t already discussed at length by BoC Governor Tiff Macklem at last Friday’s speaking event.
  • BoC Macklem: It’s still too early to consider cutting our policy rate
  • Thursday’s Canadian Retail Sales for October are forecast to improve to 0.8% from September’s 0.6%, and Friday’s Canadian Gross Domestic Product print is forecast to round out the trading year with an upbeat expectation of 0.2% in October versus September’s 0.1%.

Canadian Dollar price today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.24% 0.34% 0.09% 0.03% 0.49% 0.06% -0.30%
EUR 0.22%   0.54% 0.34% 0.27% 0.74% 0.30% -0.06%
GBP -0.30% -0.54%   -0.22% -0.27% 0.19% -0.25% -0.60%
CAD -0.10% -0.34% 0.20%   -0.07% 0.40% -0.04% -0.39%
AUD -0.03% -0.27% 0.31% 0.07%   0.46% 0.03% -0.32%
JPY -0.49% -0.72% -0.16% -0.40% -0.48%   -0.42% -0.79%
NZD -0.07% -0.30% 0.24% 0.04% -0.04% 0.43%   -0.36%
CHF 0.29% 0.06% 0.60% 0.38% 0.32% 0.79% 0.35%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical Analysis: The Canadian Dollar’s Monday pause could give way to full-blown pullback if Greenback bidders catch Loonie bulls with their pants down

Monday sees the Canadian Dollar pulling back into 1.3400 against the US Dollar in a slight paring back from recent bullish momentum. The Canadian Dollar’s three-day bull run last week saw the USD/CAD tip into multi-month highs near 1.3350 after falling from last week’s highs near the 1.3600 handle.

The pair is down over three and a half percent from November’s early high just below 1.3900, but last week’s clean break of the 200-day Simple Moving Average (SMA) near 1.3500 could see the USD/CAD primed for a pullback.

If Loonie bidding doesn’t return meaningfully to push the pair back down to 2023’s bottom bids near 1.3100, the ceiling on a bullish rebound for the Greenback might not firm up until bids return to the 50-day SMA descending into 1.3650.

USD/CAD Hourly Chart

USD/CAD Daily Chart

Canadian Dollar FAQs

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 the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. 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) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

Macroeconomic data releases gauge 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 sentiment surveys can all 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 put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

Discover the Latest on the Canadian Dollar: A Slight Ease and CPI in the Barrel

The Canadian dollar, also known as the loonie, is the official currency of Canada, and is widely used for trade and investment within the country. The value of the Canadian dollar is closely monitored by investors, as it can greatly affect the performance of the Canadian economy. In recent months, there have been some notable developments in the world of the Canadian dollar, including a slight decrease in the value of the loonie and the release of CPI (Consumer Price Index) data. In this article, we will take a closer look at these developments and what they mean for the Canadian dollar and the country’s economy. So, let’s dive in and discover the latest on the Canadian dollar.

A Slight Ease in the Value of the Canadian Dollar

In the past few weeks, the Canadian dollar saw a slight decrease in its value against other major currencies, including the US dollar and the Euro. This decrease can be attributed to a variety of factors, including a drop in oil prices, weaker economic data, and uncertainty around international trade agreements.

One of the main reasons for the loonie’s decrease in value is the drop in oil prices. Canada is one of the largest oil-producing countries in the world, and the performance of its oil industry greatly affects the Canadian dollar. In recent weeks, there has been a decrease in global demand for oil due to the ongoing COVID-19 pandemic, which has led to a decline in oil prices. This has ultimately impacted the value of the loonie, as many investors see the Canadian dollar as a commodity currency that is heavily reliant on the performance of the oil industry.

In addition to the drop in oil prices, weaker economic data has also contributed to the slight ease in the value of the Canadian dollar. Despite the country’s gradual reopening following the COVID-19 lockdowns, the economic recovery has been slower than expected. This has caused some concern among investors and has led to a decrease in demand for the loonie. Moreover, the uncertainty around international trade agreements, especially with the United States and China, has also affected the value of the Canadian dollar. Any changes in trade policies or tariffs can have a significant impact on the country’s economy, and therefore, the value of its currency.

CPI in the Barrel: What Does This Mean for the Canadian Dollar?

Another important development in the world of the Canadian dollar is the recent release of CPI (Consumer Price Index) data. The CPI is an important economic indicator that measures the average change in prices of goods and services over time. This data is a key driver in determining the country’s inflation rate, which in turn, plays a crucial role in shaping monetary policy.

According to the latest CPI data released by Statistics Canada, there was a slight increase in inflation in June, driven by a rise in the cost of food and shelter. This may seem like good news for the Canadian dollar, as it could indicate a strong economy and lead to a potential increase in interest rates. However, many experts believe that this increase in inflation is only temporary and may not have a significant impact on monetary policy.

Furthermore, the COVID-19 pandemic has blurred the lines between traditional economic indicators and the current state of the economy. As countries continue to grapple with the effects of the pandemic, the usual rules and trends may not apply. This could lead to an increased level of volatility in the currency market and affect the value of the Canadian dollar.

Practical Tips for Investors

For investors who are interested in trading with the Canadian dollar, it’s important to keep a close eye on market developments and economic data. While the recent decrease in the loonie’s value may create some opportunities for investors, it’s essential to assess the risks and make informed decisions. Additionally, staying up-to-date with developments in the oil industry and trade policies is crucial for understanding the potential impact on the Canadian dollar.

Moreover, diversifying your investment portfolio with other currencies can help mitigate the risks associated with investing solely in the Canadian dollar. As the saying goes, “don’t put all your eggs in one basket,” diversification is key to long-term success in the world of investing.

Conclusion

In conclusion, the Canadian dollar has experienced a slight ease in its value in recent weeks, mainly due to a drop in oil prices and weaker economic data. However, the release of CPI data has brought about some positive news for the Canadian economy. Moving forward, it is crucial to closely monitor market developments and economic indicators to make informed decisions when it comes to trading with the loonie.

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