- Canadian Dollar climbs on Monday, catching a broad-market bid.
- Canada economic data is thin this week, but BoC Gov Macklem will make Friday appearance.
- US CPI inflation, Fed rate call and interest rate outlook to be the week’s linchpin.
The Canadian Dollar (CAD) eased higher on Monday, taking a slim but broad step up against its major currency peers as markets gear up for a hectic week that sees several high-impact central bank showings to round the corner into the end of the trading year.
Canada is largely absent from the economic calendar data docket this week, with only a smattering of low-tier data late Thursday and into Friday. The only event of note will be Bank of Canada (BoC) Governor Tiff Macklem’s appearance, slated for late Friday. BoC Governor Macklem will be giving a speech at the Economic Club of Toronto, with the speech text released fifteen minutes ahead.
The upcoming trading week will see significant focus on central bank action with a US inflation data kicker when US Consumer Price Index (CPI) inflation is released on Tuesday. Wednesday will be of particular note to CAD when the US Federal Reserve (Fed) releases its latest rate call as markets broadly forecast a hold at 5.25% to 5.5%.
The US Federal Open Market Committee (FOMC) will release its updated economic projections alongside its policy statement, and investors will be looking closely at any changes to the FOMC’s forward-looking interest rate projections, known as the “Dot Plot”. The Fed’s Monetary Policy Statement and rate call are slated for 19:00 GMT on Wednesday, with the FOMC Press Conference thirty minutes later at 19:30 GMT.
Daily Digest Market Movers: Canadian Dollar steps higher across the board in thin Monday action
- The Canadian Dollar is in the green to kick off the new trading week, climbing over a full percent against the Japanese Yen (JPY).
- The CAD is hardening gains against the Aussie (AUD) and Kiwi (NZD), up one third and a sixth of a percent against the Antipodeans, respectively.
- The CAD’s weakest performance on Monday is still on the high side, gaining a scant half of a tenth of a percent against the Swiss Franc (CHF) and a tenth of a percent against the Pound Sterling (GBP) and the US Dollar (USD) in Monday trading.
- The broader market’s key focus in the early week will be US inflation data with Tuesday’s CPI release.
- Market forecasts call for Core US CPI to climb at the near end of the tail with annualized inflation expected to hold steady.
- Headline MoM US CPI inflation is forecast to tick up from 0.0% to 0.1% for November, with the YoY expected to tick down from 3.2% to 3.1%.
- November’s Core US CPI is forecast to print at 0.3% versus October’s 0.2%, with consumer price growth (less food and energy prices) expected to hold flat at 4% for the year into November, still well above the Fed’s 2% target.
- Market could see positioning shifts on Tuesday as investors glean Fed forecasts from Tuesday’s CPI inflation print.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the Swiss Franc.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.14% | 0.06% | -0.06% | 0.31% | 0.98% | 0.10% | -0.01% | |
EUR | -0.13% | -0.07% | -0.19% | 0.18% | 0.85% | -0.02% | -0.14% | |
GBP | -0.04% | 0.08% | -0.13% | 0.24% | 0.92% | 0.02% | -0.07% | |
CAD | 0.09% | 0.21% | 0.12% | 0.37% | 1.05% | 0.16% | 0.05% | |
AUD | -0.31% | -0.16% | -0.25% | -0.37% | 0.68% | -0.22% | -0.32% | |
JPY | -0.99% | -0.84% | -1.01% | -1.06% | -0.67% | -0.88% | -1.00% | |
NZD | -0.07% | 0.07% | -0.01% | -0.13% | 0.24% | 0.91% | -0.08% | |
CHF | 0.03% | 0.18% | 0.09% | -0.03% | 0.34% | 0.99% | 0.10% |
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).
The Canadian Dollar (CAD) is bidding higher on Monday, seeing thin but determined gains against the US Dollar (USD) to keep the USD/CAD pair pinned below the 1.3600 handle.
Intraday action sees some consolidation for the USD/CAD between the 50-hour and 200-hour Simple Moving Averages (SMA) near 1.3585 and 1.3570, respectively. Bids have cycled inside last week’s late range between 1.3620 and 1.3560.
Daily candlesticks have the USD/CAD waffling just north of the 200-day SMA near 1.3515, and price action is set to see some rough chop with the pair caught between the 200-day SMA and the 50-day SMA near 1.3700. Technical resistance firms up at the 1.3600 handle, sandwiching prices between the major price level and the long-term moving average.
USD/CAD Hourly Chart
USD/CAD Daily Chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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