- Canadian Dollar found a little room but remains sedate in midweek trading.
- Canada drops Unemployment Rate, job additions figures on Friday.
- An overall thin week on the calendar leaves markets in a quiet lurch.
The Canadian Dollar (CAD) saw soft gains on Wednesday as markets steadily ate away at last week’s surge in the US Dollar (USD) that sent the Loonie skidding into multi-month lows. The Canadian Dollar is sticking close to firmly-entrenched median bids against the Greenback as broad-market momentum bleeds into the midrange.
Canada sees January’s Unemployment Rate and Net Change in Employment figures on Friday, and Loonie traders will be gearing up for the key labor data dump with markets holding steady, rounding the corner on Wednesday.
Daily digest market movers: Canadian Dollar trades thin, but eyes on the upside
- Wednesday’s key headlines focus on talking points from US Federal Reserve (Fed) policymakers with several Fed Board members hitting the newswires.
- The economic calendar remains thin midweek as investors continue to chew on rate cut prospects.
- Money markets remain far out-of-line with current Fed projections on rate cuts.
- Minneapolis Fed President Neel Kashkari reiterated his view of two or three rate cuts through 2024.
- The CME’s FedWatch Tool shows money markets are still pricing in at least six rate cuts this year, though cracks are beginning to show in the odds.
- Money markets now see a 66.4% chance of a rate cut in May, down significantly from being fully priced in just a month ago.
- Canada is expected to see its Unemployment Rate tick upward in January to 5.9% from 5.8%.
- Canada’s Net Change in Employment is forecast to add 15K new jobs in January.
- BoC Summary of Deliberations: Global growth has slowed, but less than projected
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 Swiss Franc.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.06% | -0.12% | -0.10% | 0.16% | 0.20% | -0.11% | 0.49% | |
EUR | 0.04% | -0.06% | -0.04% | 0.22% | 0.26% | -0.05% | 0.55% | |
GBP | 0.13% | 0.07% | 0.03% | 0.29% | 0.34% | 0.02% | 0.64% | |
CAD | 0.11% | 0.04% | -0.03% | 0.26% | 0.30% | -0.01% | 0.60% | |
AUD | -0.16% | -0.22% | -0.29% | -0.26% | 0.04% | -0.27% | 0.34% | |
JPY | -0.19% | -0.23% | -0.29% | -0.30% | -0.01% | -0.30% | 0.27% | |
NZD | 0.12% | 0.05% | -0.01% | 0.02% | 0.27% | 0.32% | 0.60% | |
CHF | -0.50% | -0.59% | -0.62% | -0.60% | -0.34% | -0.28% | -0.64% |
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 broadly higher, but action remains thin
The Canadian Dollar (CAD) saw gains against nearly all of its major currency peers on Wednesday, gaining notable ground against the Swiss Franc (CHF) and the Japanese Yen (JPY). The Canadian Dollar is close to flat against the Pound Sterling (GBP), and the Loonie is up around a tenth of a percent against the US Dollar, helping to keep the USD/CAD pair pinned below the 1.3500 handle.
USD/CAD fell below 1.3500 on Tuesday, and the pair remains unable to reclaim the key handle, etching in an intraday low of 1.3455 on Wednesday.
Daily candlesticks have the USD/CAD trading firmly into the 200-day Simple Moving Average (SMA) near 1.3475, and the pair is at risk of tipping back into a congestion zone between the 50-day and 200-day SMAs as long-term trends drift into a consolidation trap.
A tilt into bullish territory will need to break above 1.3550 to make another leg higher, while sellers will be looking for further downside from the near-term swing low into 1.3558.
USD/CAD hourly chart
USD/CAD daily chart
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
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