Canadian Dollar softens on Monday, investors looking to Tuesday’s Canada CPI inflation

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  • The Canadian Dollar is trading steady as markets chew a quiet Monday.
  • CPI inflation in Canada is slated for Tuesday, Retail Sales at the end of the week.
  • Crude Oil is continuing to push higher, bolstering the CAD.

The Canadian Dollar (CAD) is leaning into the low side in quiet Monday trading as markets churn on US Dollar (USD) bets, but Loonie losses appear limited by rising Crude Oil bids.

Consumer Price Index (CPI) inflation figures from Canada are due on Tuesday, and Canadian Retail Sales are on the docket for Friday. Tuesday will also be seeing the Federal Reserve’s (Fed) latest Federal Open Market Committee (FOMC) Meeting Minutes.

Daily Digest Market Movers: Canadian Dollar softly higher on quiet but softly optimistic Monday 

  • Tuesday’s Canadian CPI figures to be the focus for Loonie traders.
  • Markets are expecting a slight uptick in the MoM figure, 0.1% for October compared to September’s -0.1%.
  • Annualized Canadian CPI inflation expected to cool slightly, print at 3.6% versus the previous 3.8%.
  • With broader markets largely focused on the US Dollar, the Fed’s Meeting Minutes release on Tuesday could see added focus.
  • Markets are betting that the Fed is now done with rate hikes, investors to focus on inflation figures in anticipation of future rate cuts.
  • Crude Oil markets drift higher on Monday, but open interest is declining, which could see declining support for the Loonie.
  • The Loonie is in the red across the majors board, only slightly down against the Greenback
  • Canada CPI Preview: Forecasts from six major banks, inflation to decelerate further.

Technical Analysis: Canadian Dollar looking for a foothold in soft Monday trading

The Canadian Dollar (CAD) is getting pushed into the low end for Monday’s trading session, tipping into 1.3750 as the USD/CAD pair recovers into the 50-hour Simple Moving Average (SMA). The pair set an intraday low near 1.3690 in early chart action, but the USD/CAD is now paring back Friday’s declines from the 200-hour SMA at 1.3760.

On the daily candlesticks, the USD/CAD is continuing to see bids pushing into dynamic technical support at the rising trendline from July’s 1.3100 lows. Bids continue to see support from the 50-day SMA, and the long-term trend appears to support continued USD strength.

On the bearish side, the USD/CAD is struggling to establish meaningful gains, and downside risks are mounting as the pair trades into the year’s high side.

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   -0.30% -0.41% 0.05% -0.69% -1.02% -0.68% -0.12%
EUR 0.31%   -0.11% 0.36% -0.37% -0.70% -0.36% 0.20%
GBP 0.41% 0.11%   0.46% -0.27% -0.59% -0.26% 0.30%
CAD -0.05% -0.36% -0.47%   -0.73% -1.06% -0.72% -0.16%
AUD 0.67% 0.37% 0.27% 0.73%   -0.33% 0.01% 0.56%
JPY 1.01% 0.71% 0.37% 1.06% 0.33%   0.33% 0.89%
NZD 0.67% 0.37% 0.26% 0.72% -0.01% -0.34%   0.57%
CHF 0.11% -0.19% -0.30% 0.16% -0.57% -0.91% -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).

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.