Canadian Dollar surges after Bank of Canada leaves rates unchanged on Wednesday.
- BoC holds rates at 5%, doesn’t expect 2% inflation in 2024.
- Canada releases labor figures on Friday that will be overshadowed by US NFP.
- Fed Chair Powell doesn’t see recession, Greenback eases on Wednesday.
The Canadian Dollar (CAD) surged half a percent against the US Dollar (USD) on Wednesday after the Bank of Canada (BoC) held rates at 5.0% as markets had broadly expected. Federal Reserve (Fed) Chair Jerome Powell added to downside Greenback pressure, noting that the Fed needs more evidence of inflation reaching 2%, but doesn’t see risk of a US recession on the cards.
Canada’s next key data print will be Friday’s labor figures, but the US Nonfarm Payrolls (NFP) report is likely to engulf market attention to end the trading week. Markets are expecting the Canadian Unemployment Rate to tick slightly higher to 5.8% from 5.7%. February’s US NFP print is expected to ease back to 200K from January’s 11-month high of 353K.
Daily digest market movers: Canadian Dollar climbs, Greenback slides on CB-heavy Wednesday
- BoC Governor Tiff Macklem:
- Most likely won’t achieve 2% inflation this year.
- Shelter price inflation weighs on BoC decisions.
- Overwhelming consensus within BoC that rates need to stay at 5%.
- Looking for consistency across all inflation indicators.
- BoC's Tiff Macklem: The governing council unanimously agreed to maintain rates at 5%
- Federal Reserve Chair Jerome Powell:
- There is no reason to think the economy is in or faces significant near-term risk of recession.
- Fed sees ongoing solid growth, should continue moving forward.
- Would like to have more confidence on inflation. Fed has some confidence but needs more.
- Jerome Powell Speech: Fed Chair doesn't see elevated risk of recession
- According to Canadian money markets, there is less than 25% odds of a BoC rate cut in April, down from over 40% before Tiff Macklem’s appearance on Wednesday.
- The US ADP Employment Change came in below expectations, printing at 140K for February versus the forecast of 150K, while the previous print saw a revision up to 111K from 107K.
- Canada’s seasonally-adjusted Ivey Purchasing Managers Index (PMI) eased to 53.9 in February versus the previous month’s 56.5.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.48% | -0.41% | -0.60% | -1.13% | -0.48% | -0.83% | -0.27% | |
| EUR | 0.48% | 0.07% | -0.10% | -0.64% | 0.01% | -0.33% | 0.23% | |
| GBP | 0.41% | -0.07% | -0.18% | -0.71% | -0.06% | -0.41% | 0.15% | |
| CAD | 0.59% | 0.11% | 0.17% | -0.54% | 0.11% | -0.23% | 0.33% | |
| AUD | 1.12% | 0.64% | 0.70% | 0.50% | 0.63% | 0.28% | 0.85% | |
| JPY | 0.49% | 0.00% | 0.06% | -0.11% | -0.63% | -0.33% | 0.20% | |
| NZD | 0.83% | 0.36% | 0.41% | 0.24% | -0.30% | 0.36% | 0.58% | |
| CHF | 0.27% | -0.21% | -0.15% | -0.33% | -0.85% | -0.22% | -0.56% |
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 surges to within reach of 1.3500 against Greenback
The Canadian Dollar (CAD) is broadly higher on Wednesday, gaining over half a percent against the US Dollar (USD) and around a third of a percent against the Swiss Franc (CHF). The CAD is down around half a percent against the Australian Dollar (AUD) as the Aussie stands as the market’s best-performing currency for the day.
USD/CAD tumbled into 1.3510 from Wednesday’s intraday high near the 1.3600 handle. The pair is within range of slipping back into 1.3500 after falling through the 200-hour Simple Moving Average (SMA) at 1.3551.
Daily candlesticks are on pace to see one of their worst performances since December, with USD/CAD falling over 0.6% top-to-bottom on Wednesday. The technical floor underneath USD/CAD sits at the 200-day SMA at 1.3477.
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.
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