- Canadian Dollar sees thin action in quiet midweek market.
- Canada brings strictly low-impact data for the rest of the week.
- CAD recovery supported by Crude Oil, but energy market hesitation limits gains.
The Canadian Dollar (CAD) churns on Wednesday as markets continue to digest Tuesday’s harsh shift in rate cut expectations after US inflation came in hotter than investors were hoping. Rate cut hopes have been pushed further out, propping up the US Dollar (USD) and keeping the Canadian Dollar pinned in the red by around three-quarters of a percent against the Greenback.
Canada sees low-tier economic data releases for the rest of the week, which are likely to be overshadowed by US data prints as investors find themselves at odds with the US economy. Rate cut hopes are pinned on US inflation cooling off at a much faster trajectory, as well as an overall decline in US economic health that has thus far failed to materialize.
Daily digest market movers: Canadian Dollar finds little momentum on quiet Wednesday
- The Canadian Dollar sees some sideways churn in the midweek after markets saw a sharp adjustment on the back of Tuesday’s US inflation figures.
- Crude Oil markets tested higher on Wednesday, helping to bolster the Loonie.
- Another surprise buildup in US Crude Oil stocks is weighing on barrel bids on Wednesday.
- The Energy Information Administration (EIA) reported over 12 million barrels of excess Crude Oil added to US supply lines for the week ended February 9.
- The barrel buildup adds to the American Petroleum Institute’s (API) 8.52 million barrel surplus reported on Tuesday for the same period.
- Canadian Housing Starts are forecast to increase slightly for the year through January on Thursday, expected to tick up to 235K from 249.3K.
- Markets to focus entirely on US Retail Sales on Thursday, January’s MoM figure forecast to soften to -0.1% versus December’s 0.6%.
- US Initial Jobless Claims for the week ended February 9 also are on the docket for Thursday, expected to show 220K new jobless benefits applicants versus the previous week’s 218K.
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 Pound Sterling.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.18% | 0.30% | -0.10% | -0.56% | -0.12% | -0.49% | -0.23% | |
EUR | 0.19% | 0.49% | 0.09% | -0.36% | 0.06% | -0.28% | -0.03% | |
GBP | -0.30% | -0.50% | -0.40% | -0.85% | -0.43% | -0.78% | -0.53% | |
CAD | 0.10% | -0.10% | 0.40% | -0.44% | -0.03% | -0.37% | -0.13% | |
AUD | 0.54% | 0.36% | 0.85% | 0.44% | 0.41% | 0.07% | 0.31% | |
JPY | 0.12% | -0.08% | 0.42% | 0.03% | -0.42% | -0.35% | -0.11% | |
NZD | 0.48% | 0.28% | 0.77% | 0.37% | -0.07% | 0.35% | 0.27% | |
CHF | 0.22% | 0.03% | 0.51% | 0.12% | -0.32% | 0.09% | -0.26% |
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 thin gains on Wednesday
The Canadian Dollar (CAD) is mixed to flat in Wednesday’s market action, seeing only scant gains against the US Dollar of around a tenth of a percent. The broader market bid the Australian Dollar (AUD) up four-tenths of a percent against the CAD, while the Loonie shed around a third of a percent against the New Zealand Dollar (NZD). The Canadian Dollar sees its strongest performance against the Pound Sterling (GBP), up around four-tenths of a percent, on Wednesday.
USD/CAD found some friction near 1.3550 after Tuesday’s surge over the 1.3500 handle, but buyers are struggling to shove the pair back into the 1.3600 level. The pair remains bolstered above the 200-day Simple Moving Average (SMA) at 1.3478 with Wednesday’s tentative low etched in near 1.3530.
USD/CAD hourly chart
USD/CAD daily chart![](https://i0.wp.com/editorial.fxstreet.com/miscelaneous/USD_CAD-638435253547028844.png?w=788&ssl=1)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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