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Unstoppable Canadian Dollar: Monday Markets See Strong Performance

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  • Canadian Dollar sees thin gains with support from steady Crude Oil bids.
  • Canada sees a data-light economic calendar this week.
  • Markets kick off the new trading week on a quiet note ahead of key US inflation data.

The Canadian Dollar (CAD) found some room on the high side on Monday, drifting into the green against most of its major currency peers in thin Monday trading. Markets have opened on a quiet note as investors gear up for a smattering of US economic data, with Tuesday’s US Consumer Price Index (CPI) inflation print a key focus for markets heavily invested in betting on rate cuts from the US Federal Reserve (Fed).

Canada has a light showing on the economic calendar this week, and CAD releases on the data docket are strictly low-impact. Thursday’s Housing Starts are expected to slightly improve, while Friday’s Wholesale Sales are forecast to tick slightly lower. Overall, CAD flows can expect to see Crude Oil markets and US Dollar (USD) risk appetite take the wheel this week.

Daily digest market movers: Canadian Dollar churns in familiar technical territory

  • Quiet Monday markets give the Canadian Dollar a chance to recover into the high side, but the CAD remains positioned within familiar chart territory.
  • Crude Oil found some support on Monday, helping to bolster the CAD.
  • Saudi Arabia’s Energy Minister, Abdulaziz bin Salman Al Saud, stated that the Organization for the Petroleum Exporting Countries (OPEC) remains “ready to tweak oil policy at any time”.
  • Fed officials continue to reiterate a more moderate policy stance than markets are hoping for.
  • Fed’s Bowman: It is still too soon to project when or how much the Fed will cut rates.
  • More Bowman: Many risks still remain for Fed’s inflation fight, doesn’t see cuts as appropriate in the ‘immediate future’.
  • The New York Fed’s inflation outlook sees three-year inflation at 2.4% in January, down from December’s three-year outlook of 2.6%.
  • According to the CME’s FedWatch Tool, markets are still pricing in nearly 60% odds of a May rate cut.
  • Money markets are still holding out hope for six rate cuts through 2024.

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 New Zealand Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.24% 0.06% -0.04% -0.09% 0.11% 0.25% 0.16%
EUR -0.23%   -0.16% -0.28% -0.31% -0.12% 0.03% -0.06%
GBP -0.08% 0.16%   -0.12% -0.16% 0.03% 0.18% 0.10%
CAD 0.04% 0.28% 0.10%   -0.05% 0.15% 0.30% 0.20%
AUD 0.09% 0.32% 0.15% 0.04%   0.20% 0.34% 0.25%
JPY -0.11% 0.13% -0.02% -0.15% -0.20%   0.15% 0.05%
NZD -0.26% -0.02% -0.18% -0.30% -0.35% -0.14%   -0.09%
CHF -0.16% 0.08% -0.10% -0.20% -0.25% -0.05% 0.08%  

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: Canadian Dollar sees green in quiet Monday chart action

The Canadian Dollar is broadly higher on Monday, seeing thin gains as markets gear up for another trading week. A quiet Monday has the CAD on the high side for the day, gaining around a third of a percent against the broadly weaker New Zealand Dollar (NZD) and Euro (EUR). The Canadian Dollar is higher against the US Dollar by a scant twentieth of a percent and close to flat against the Australian Dollar (AUD).

USD/CAD remains pinned below the 1.3500 handle after last week’s decline from the 1.3540 neighborhood, and intraday action continues to cycle the 200-hour Simple Moving Average (SMA) as near-term momentum remains limited.

Daily candlesticks have the USD/CAD trading back into a congestion zone just south of the 200-day SMA near 1.3475 as the 50-day SMA consolidates into the midrange near 1.3420, capping off bearish momentum and squeezing the pair into the middle.

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.

Unstoppable Canadian Dollar: Monday Markets See Strong Performance

The Canadian dollar, also known as the “loonie,” has been performing exceptionally well in the global market recently, with Monday markets seeing a particularly strong performance. This steady rise in value has caught the attention of investors, analysts, and economists alike, as the Canadian dollar continues to outperform its peers. In this article, we’ll delve into the reasons behind the ongoing success of the Canadian dollar and how it has become an unstoppable force in the Monday markets.

Background on the Canadian Dollar

Before we dive into the current state of the Canadian dollar in the Monday markets, let’s take a quick look at its history and what factors contribute to its value. The Canadian dollar has been the official currency of Canada since 1858, replacing the previous currency known as the Canadian pound. The name “loonie” comes from the iconic image of a loon, a bird prominently featured on the one-dollar coin, and the nickname has stuck ever since.

The Canadian dollar is the fifth most traded currency in the world, after the U.S. dollar, euro, Japanese yen, and British pound. It is also the seventh-largest reserve currency globally, making it a significant player in the international foreign exchange market. The value of the loonie is determined by various factors, including the state of the Canadian economy, global market trends, and international trade relations.

Rise in Global Oil Prices

One of the main drivers of the current strength of the Canadian dollar in the Monday markets is the sharp rise in global oil prices. Canada is the fourth-largest producer of oil in the world, and oil exports account for a significant portion of the country’s GDP. As the demand for oil increases globally, prices go up, and this increase in oil prices has had a positive impact on the Canadian dollar’s value.

Moreover, the world has seen an improved outlook in the demand for oil as economies are recovering from the COVID-19 pandemic. This has resulted in a steady increase in oil prices, providing a massive boost to the Canadian dollar’s value. This trend is expected to continue in the coming months, further strengthening the loonie and its performance in the Monday markets.

Stable Canadian Economy

Another significant reason for the Canadian dollar’s strong performance in the Monday markets is the stability of the Canadian economy. Despite the challenges posed by the pandemic, the Canadian government has managed to control the spread of the virus and implement effective economic policies. As a result, Canada’s economic recovery has been faster than expected, and the country has managed to avoid a severe recession.

The Canadian economy grew by 6.5% in the first three months of 2021, which is the highest quarterly growth rate since 1961. This has been driven by increased consumer spending, a rebound in international trade, and a boom in the housing market. Furthermore, the Bank of Canada has kept interest rates low, providing further stimulus for economic growth and ultimately strengthening the Canadian dollar’s value.

Impact on International Trade

The rise of the Canadian dollar in the Monday markets has also had a notable impact on international trade. As the loonie becomes stronger, it becomes cheaper for Canadians to purchase goods and services from other countries, resulting in increased import demand. This trend has also made Canadian exports more competitive, as foreign buyers can now purchase goods from Canada for less.

The strength of the Canadian dollar has also led to lower manufacturing costs, making Canadian exports more attractive to other nations. Additionally, Canada’s trade surplus has been growing, with exports exceeding imports by $135 billion in 2021, showing the positive impact of the Canadian dollar’s performance on the country’s trade balance.

Investment Opportunities for Canadians

The strong performance of the Canadian dollar in the Monday markets has also opened up several investment opportunities for Canadians. With the loonie gaining more value, Canadians can see gains when investing in international assets, such as stocks, real estate, and commodities. Canadian investors can also take advantage of a stronger currency by purchasing foreign goods and services at lower prices, making it a win-win situation.

Practical Tips for Canadians

As the Canadian dollar continues to dominate the Monday markets, here are some practical tips for Canadians to make the most out of this situation:

1. Take Advantage of Low Interest Rates: The Bank of Canada has kept interest rates low, providing Canadians with an excellent opportunity to refinance their mortgages or other loans at lower rates. This will help reduce debt and improve personal finances in the long run.

2. Invest in International Assets: With the Canadian dollar gaining strength, it’s a good time for Canadians to diversify their investment portfolios by investing in international assets.

3. Travel with the Loonie: The Canadian dollar’s current strength makes traveling to other countries more affordable for Canadians. Take advantage of this by planning a trip abroad while the loonie’s value is high.

Case Study: The Impact of the Strong Canadian Dollar on Exports

The strength of the Canadian dollar in the Monday markets has had a massive impact on the country’s exports, particularly in the manufacturing sector. For instance, the Canadian furniture company, WestRock, has been able to expand its export business to the United States, thanks to the loonie’s improved value.

With the help of government grants and a favorable exchange rate, WestRock has been able to invest in expanding its production and increase exports to the U.S., resulting in an increase in sales and profits. This case study demonstrates how the strong Canadian dollar can benefit businesses and contribute to the country’s economic growth.

In conclusion, the Canadian dollar’s performance in the Monday markets has been nothing short of impressive, and there are several factors driving this unstoppable rise. From a stable economy to a surge in global oil prices, the loonie is showing no signs of slowing down. As Canadians, it’s crucial to take advantage of this situation and make the most out of the strong loonie. By investing wisely and managing personal finances, Canadians can continue to reap the benefits of a stronger currency.

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