USD/CAD drops even though US Dollar rebounds, Canadian Q3 GDP in focus
- USD/CAD ticks lower as the Canadian Dollar gains on expectations of healthy trade negotiations with the US.
- Economists expect the Canadian economy to have grown by 1% in the third quarter of the year.
- The US Dollar recovers amid quiet trade on account of Thanksgiving Day.
The USD/CAD pair falls to near the psychological support of 1.4000 in European trading hours on Thursday despite a decent recovery move in the US Dollar (USD). The Loonie asset drops as the Canadian Dollar (CAD) gains on expectations that Canada would manage to negotiate a trade deal with the United States (US).
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 | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.28% | 0.20% | 0.55% | -0.12% | 0.00% | 0.16% | 0.27% | |
| EUR | -0.28% | -0.07% | 0.29% | -0.39% | -0.26% | -0.11% | 0.00% | |
| GBP | -0.20% | 0.07% | 0.35% | -0.31% | -0.18% | -0.04% | 0.08% | |
| JPY | -0.55% | -0.29% | -0.35% | -0.66% | -0.53% | -0.42% | -0.27% | |
| CAD | 0.12% | 0.39% | 0.31% | 0.66% | 0.14% | 0.26% | 0.39% | |
| AUD | -0.01% | 0.26% | 0.18% | 0.53% | -0.14% | 0.15% | 0.27% | |
| NZD | -0.16% | 0.11% | 0.04% | 0.42% | -0.26% | -0.15% | 0.11% | |
| CHF | -0.27% | -0.00% | -0.08% | 0.27% | -0.39% | -0.27% | -0.11% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
US President-elect Donald Trump said in a post on Truth.Social on Monday that he will impose 25% tariffs on Canada and Mexico for providing a freeway to China to supply illicit drugs into the US economy.
Canada is a leading supplier of oil, gas, and energy products to the US. A scenario of higher tariffs on Canada would result in a significant decline in foreign flows in their economy, which is negative for the Canadian Dollar (CAD).
"Targeting both countries suggests the threat was likely a strategic opening move in renegotiating the existing free trade agreement between the three nations," said analysts at AscendantFX.
However, there will be some impact on the CAD from incoming tariffs in Trump’s administration.
This week, investors will focus on the Canadian Q3 Gross Domestic Product (GDP) data, which will be published on Friday. The Canadian economy is estimated to have expanded by 1% compared to the same quarter of the previous year but slower than 2.1% in the previous quarter of the year.
Meanwhile, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, bounces back to near 106.40 amid thin trading volume due to a holiday in the US markets on account of Thanksgiving Day.
The USD Index will be influenced by market expectations about the Federal Reserve’s (Fed) interest rate action in the December meeting. According to the CME FedWatch tool, there is a 70% chance that the Fed will cut interest rates by 25 basis points (bps) to 4.25%-4.50% next month, according to the CME FedWatch tool.
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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