Date | Rate | Change |
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The Loonie benefited significantly from Wednesday's BoC decision with USD/CAD nosediving a full figure lower to 1.3500. Economists at Commerzbank analyze the pair’s outlook.
The BoC left its key interest rate unchanged at 5%. At the same time, the BoC continued to emphasize that it is too early to talk about rate cuts. The statement also kept the reference to ongoing risks for the inflation outlook. Overall, this was a fairly hawkish decision.
Some market participants were expecting a more dovish tone in the statement. The fact that the BoC did not deliver reinforces our view that the BoC is unlikely to cut rates until after the Fed. We therefore continue to see upside potential for the CAD in the coming months.
The USD/CAD pair struggles to capitalize on the Asian session uptick on Thursday and languishes near the 1.3500 psychological mark, just above a one-week low touched the previous day.
Mixed signals on the Federal Reserve's (Fed) rate-cut path fail to assist the US Dollar (USD) to register any meaningful recovery from its lowest level since early February, which, in turn, is seen acting as a headwind for the USD/CAD pair. Fed Chair Jerome Powell told US lawmakers on Wednesday that the central bank will cut interest rates this year, though wants to see more evidence that inflation is falling to the 2% target. Minneapolis Fed President Neel Kashkari, however, downplayed speculations about more aggressive policy easing and said that he may reduce the number of cuts this year, possibly to only one in the wake of the incoming stronger US macro data.
The Canadian Dollar (CAD), on the other hand, continues to draw support from a hawkish hold from the Bank of Canada (BoC) on Wednesday. Meanwhile, subdued Crude Oil prices do little to provide any meaningful impetus to the commodity-linked Loonie. Furthermore, the yield on the benchmark 10-year US government bond rebounds from a one-month low touched on Wednesday, which, along with a generally softer tone around the equity markets, acts as a tailwind for the safe-haven buck. This, in turn, should help limit any meaningful downside for the USD/CAD pair and warrants some caution before positioning for any further depreciating move.
Moving ahead, investors now look to Fed Chair Powell's second day of testimony before the Senate Banking Committee. Apart from this, traders will take cues from Thursday's economic docket – featuring the US Weekly Initial Jobless Claims, and Trade Balance figures from the US and Canada. This, along with the US bond yields and the broader risk sentiment, will influence the USD demand and provide some impetus to the USD/CAD pair.
USD/CAD continues to struggle to surpass the 1.3600 level. Economists at Scotiabank analyze the pair’s outlook.
The USD/CAD pair continues to run into firm resistance around the 1.3600 area but losses intraday so far are limited and the short-term USD bull trend remains intact.
Trend momentum oscillators are bullishly aligned for the USD on the intraday and daily DMI studies.
Key support remains at 1.3540, with a push below this point targeting a drop to the 1.3475/1.3480 area.
The 1.3500 magnet theory continues to dominate USD/CAD forecast and trading views, economists at Rabobank say.
USD/CAD is still the lowest volatility free-floating USD cross and we see little reason for that to change in the coming month, with the pair likely to continue range-trading around the 1.3500 handle.
We favor fading any move down towards 1.3300 and any move up towards 1.3700.
The Bank of Canada (BoC) announces monetary policy today, without releasing new economic projections. Economists at ING analyze USD/CAD outlook ahead of the meeting.
There is a risk on the downside for CAD as the BoC may introduce some reference to monetary easing today, but the overall message should remain cautious.
The rebound in Fed rate expectations has spilled into the CAD curve, which now prices in 90 bps of easing this year. There is probably little incentive for the BoC to drive rate expectations lower at this stage, and they may be happy to make this an in-between meeting without much market impact.
We remain cautious about a rebound in CAD in the near term, although a broad-based Dollar decline from the second quarter should take USD/CAD to the 1.3000 handle by year-end.
Economists at TD Securities discuss the Bank of Canada (BoC) Interest Rate Decision and its implications for the USD/CAD pair.
Bank leaves overnight rate at 5.00% as it waits for more progress on underlying inflation. Statement repeats that higher rates continue to restrain demand despite stronger Q4 GDP, inflation pressures still too broad. No substantive change to guidance. USD/CAD -0.10%.
Bank leaves overnight rate at 5.00% as it monitors progress. Statement notes that higher rates continue to restrain demand as economy moves further into excess capacity. Last paragraph softens language around inflation risks but rest of guidance unchanged as BoC repeats desire for further/sustained easing. USD/CAD +0.25%.
Bank leaves overnight rate at 5.00% but opens door to near-term cuts with guidance shift. Statement notes that soft growth has added to excess supply and that price pressures have softened considerably since January meeting. Guidance removes reference to inflation risks and softens language around GC wanting to see further progress. USD/CAD +0.60%.
The USD/CAD pair remains capped under the 1.3500 barrier during the early European session on Wednesday. Market players await the Bank of Canada (BoC) interest rate decision and press conference later in the day. The Canadian central bank is widely expected to hold its key interest rate at 5.0% at its March meeting, and financial markets anticipate the first rate cut to come in around June. USD/CAD currently trades near 1.3583, down 0.08% on the day.
According to the four-hour chart, USD/CAD keeps the bullish vibe unchanged as the pair is above 100-period Exponential Moving Averages (EMA). Additionally, the Relative Strength Index (RSI) stands in bullish territory above the 50.0 midlines, supporting the buyer for the time being.
On the bright side, the immediate resistance level for USD/CAD will emerge near a high of February 6 and a psychological mark at 1.3600. The next hurdle is seen near a high of December 12 at 1.3618, en route to a high of November 27 at 1.3711.
On the flip side, the confluence of the lower limit of the Bollinger Band and the 100-period EMA at 1.3570 acts as an initial support level for the pair. A bearish break below the latter will see a drop to a low of March 4 at 1.3545, followed by a low of February 26 at 1.3500.
The USD/CAD pair edges higher to nearly 1.3600 during the early Asian trading hours on Wednesday. The Bank of Canada (BoC) will announce the interest rate decision later in the day, with no rate change expected. The pair currently trades near 1.3598, adding 0.03% on the day.
The BoC will release its Monetary Policy Statement on Wednesday, and markets expect the Canadian central bank to keep rates steady at 5% for the fifth time in a row. Financial markets see just a 19% odds of a surprise rate cut on Wednesday at its March Italee policy meeting. Traders will take core cues from the press conference about the economic and inflation outlook.
On the USD’s front, Federal Reserve (Fed) Chair Powell’s testimony to the Senate Banking Committee on Wednesday will be a closely watched event. The dovish tone from Fed officials might exert some selling pressure on the Greenback and create a headwind for the USD/CAD pair.
About the data, the US February ISM Services PMI declined to 52.6 from 53.4 in January, below the market consensus of 53.0. The New Orders Index improved to 56.1 from 55.0 in the previous reading. The Employment Index dropped to 48.0 versus 50.5 prior, and the Prices Paid Index declined to 58.6 from 64.0 in the previous reading.
Moving on, traders will watch the BoC interest rate decision and the Fed Chair Powell’s testimony on Wednesday. The attention will shift to US labor market data on Friday. The US Nonfarm Payrolls is estimated to add 200,000 jobs in February, while the Unemployment Rate is forecast unchanged at 3.7%.
The Canadian Dollar (CAD) weakened in February and was the third worst performing G10 currency. Economists at MUFG Bank analyze Loonie’s outlook.
Declining inflation and weaker consumer spending in Canada should allow for the BoC to commence cutting rates by June. This could possibly coincide with a decision from the BoC to end its QT program. The labour market remains robust however and wage growth remains the concern that could delay a decision to cut rates and/or end QT.
Still, while the timing of starting monetary easing may differ slightly from the US, we see the extent of easing in 2H 2024 being similar which could see CAD strength versus the Dollar being less than for other G10 currency gains versus the Dollar.
USD/CAD – Q1 2024 1.3500 Q2 2024 1.3400 Q3 2024 1.3300 Q4 2024 1.3000
CAD/JPY – Q1 2024 108.89 Q2 2024 108.21 Q3 2024 107.58 Q4 2024 107.69
EUR/CAD – Q1 2024 1.4580 Q2 2024 1.4740 Q3 2024 1.4780 Q4 2024 1.4820
The USD/CAD pair trades close to three-month high near 1.3600 in the late European session on Tuesday. The Loonie asset holds strength as the market mood is cautious ahead of Federal Reserve Chair Jerome Powell’s testimony before Congress on Wednesday and a packed United States economic calendar this week.
S&P 500 futures exhibit significant losses in the early American session, indicating a decline in the risk appetite of the market participants. The US Dollar is slightly bullish after closing in negative territory in the last two trading sessions. The US Dollar Index (DXY) is up 0.08%, around 103.90 ahead of the Fed Powell’s testimony.
Fed Powell is expected to maintain hawkish rhetoric amid less conviction over inflation returning to the 2% target. Powell may reiterate that there is no need of urgency for rate cuts.
But before that, investors will focus on the Institute of Supply Management (ISM) Services PMI for February, which will be published at 15:00 GMT. According to economists, the Services PMI representing the service sector, which accounts for two-third of the US economy is expected to drop to 53.0 from 53.4 in January.
Meanwhile, the Canadian Dollar will be guided by the interest rate decision from the Bank of Canada (BoC), which will be announced on Wednesday. The BoC is expected to hold interest rates at 5% for the fifth time in a row. Market participants will focus on the guidance about when the BoC will start reducing interest rates.
USD/CAD moves back to the 1.3600 area. Economists at Scotiabank analyze the pair’s outlook.
Spot gains back to the 1.3600 area are putting a little more pressure on last week’s highs and the reversal (‘evening star’ pattern) highlighted on Monday.
A push to new short-term highs negates the reversal formation and will renew the underlying strength in the USD for a push on to the mid/upper 1.3600s.
Support remains 1.3540/1.3550.
See – USD/CAD: Loonie to weaken further before a turnaround in H2 – CIBC
The Loonie has not moved much in the last month, with USD/CAD bouncing around 1.3500. Economists at CIBC Capital Markets analyze the pair’s outlook.
We don’t expect the BoC to pivot further towards setting the stage for rate cuts until its April MPR, at which point the Loonie is likely to weaken further, with USD/CAD set to peak at 1.3700 in Q2.
Once the Fed is on the policy normalization path starting in Q3, broad USD weakness should help give the CAD a lift, with higher commodity prices in 2025 also boosting the currency.
We continue to see USD/CAD reaching 1.2900 by the end of 2025.
USD/CAD extends its winning streak for the second session on Tuesday amid a stable US Dollar (USD), which could be attributed to the risk aversion ahead of the key economic data from the United States (US). The USD/CAD pair inches higher to near 1.3590 during the Asian trading hours.
The technical analysis of the 14-day Relative Strength Index (RSI) is positioned above 50, suggesting bullish momentum for the USD/CAD pair to surpass the psychological resistance of 1.3600 following the major barrier of 1.3650.
Furthermore, the lagging indicator, Moving Average Convergence Divergence (MACD), indicates a confirmation of a bullish trend for the USD/CAD pair. This interpretation is based on the MACD line's position above the centerline and the signal line.
On the downside, the USD/CAD pair could find the key support region around the nine-day Exponential Moving Average (EMA) at 1.3552 aligned with the major support level of 1.3550. A break below this zone could prompt the pair to navigate the further support region around the 23.6% Fibonacci retracement level at 1.3505, in conjunction with the psychological level of 1.3500.
The USD/CAD pair holds below the 1.3600 barrier during the early Asian trading hours on Tuesday. The Bank of Canada (BoC) will announce the interest rate decision on Wednesday, with no change in rate expected. Meanwhile, the decline in oil prices weighs on the Loonie and provides some support to the USD/CAD pair. At press time, the pair is trading at 1.3575, unchanged for the day.
The Federal Reserve (Fed) is expected to maintain the benchmark interest rate in the 5.25% to 5.5% range at its March meeting. The financial market has priced in the first rate cuts in June, but this might change if inflation stalls or wages continue to beat forecasts. Fed President Raphael Bostic said on Monday that the central bank is under no urgent pressure to cut interest rates given a prospering economy and job market.
On the other hand, the Bank of Canada (BoC) is widely expected to hold its key interest rate at 5.0% on Wednesday. Investors have priced an 80% odd that the first rate cut to come in around June. The press conference might offer some hints about the timing of rate cuts. Dovish remarks from the BoC governor could exert some selling pressure on the Canadian Dollar (CAD).
Market players will focus on the US ISM Services PMI, which is estimated to ease from 53.4 in January to 53.0 in February. Later this week, Fed Chairman Jerome Powell’s Senate testimony will be a closely watched event ahead of the US Nonfarm Payrolls (NFP) on Friday.
USD/CAD has been trading relatively stable around 1.3500 for several weeks. Economists at Commerzbank analyze the pair’s outlook.
Given the cautious stance of the BoC, we remain comfortable with our forecast of lower USD/CAD levels in the coming quarters. However, we have adjusted the levels slightly higher to reflect the new forecast from our economists, who no longer expect a US recession.
However, we no longer expect the CAD to appreciate further against the US Dollar in 2025. The reason for this is that the Fed is likely to end its interest rate cuts earlier than the market currently expects and our economists anticipate very strong US growth. The Canadian economy is unlikely to be able to withstand this, even if growth there should also pick up again.
Source: Commerzbank Research
USD/CAD is little changed on the session so far. Economists at Scotiabank analyze the pair’s outlook.
A lower close to the USD on Friday tilts risks mildly to the downside for funds from a technical point of view.
At the very least, spot is looking at pretty solid resistance at 1.3600/1.3605 after clear rejections of the figure area last week.
The USD’s mild drop Friday also formed the third leg of a bearish ‘evening star’ pattern on the daily candle chart which should see spot put a bit more pressure on moderate support at 1.3540/1.3550 in the short run and, below there, point to a test of 1.3440/1.3450.
USD/CAD improves higher to near 1.3570 during the European session on Monday amid a stable US Dollar (USD) with improved US Treasury yields. Atlanta Fed President Raphael W. Bostic has expressed his expectation that the first cut in interest rates would likely be appropriate, possibly occurring towards the end of this year at the earliest, which provides some support for the US Dollar (USD).
According to the CME FedWatch Tool, the probability of rate cuts in March stands at 5.0%, while the likelihood of cuts in May and June is estimated at 26.8% and 53.8%, respectively.
However, the US Dollar (USD) faced downward pressure following a subdued February’s manufacturing figures from the United States (US). The US ISM Manufacturing PMI for February dropped to 47.8 from 49.1, significantly missing the market expectation of 49.5 reading. Additionally, the Manufacturing New Orders Index decreased to 49.2 from the previous 52.5 reading.
However, Higher Crude oil prices might have supported the Canadian Dollar (CAD), consequently, putting a cap on the upside of the USD/CAD pair. West Texas Intermediate (WTI) oil price edges higher to near $79.70 per barrel, by the press time.
The increase in Crude oil prices followed the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decision to extend voluntary oil output cuts, along with extended tensions between the Middle East.
Traders await the Bank of Canada’s (BoC) policy meeting scheduled on Wednesday. Market expectations suggest that the central bank will maintain its current interest rate at 5.0%.
USD/CAD retraces recent losses, reaching higher to near 1.3560 during the Asian session on Monday. This retracement occurred despite higher Crude oil prices, which typically support the Canadian Dollar (CAD) due to Canada's status as a major oil exporter. This, in turn, could limit the advances of the USD/CAD pair.
West Texas Intermediate (WTI) oil price edges higher to near $79.50 per barrel on Monday. The increase in Crude oil prices followed the Organization of the Petroleum Exporting Countries and its allies (OPEC+) decision to extend voluntary oil output cuts of 2.2 million barrels per day (bpd) into the second quarter, aligning with market expectations.
Canada's S&P Global Manufacturing Purchasing Managers Index (PMI) experienced a slight improvement, rising to 49.7 from the previous 48.3, although it remained below the 50.0 threshold which indicates contraction in the sector.
Looking ahead, the Bank of Canada (BoC) is scheduled to announce its latest interest rate decision next Wednesday. Market expectations suggest that the central bank will maintain its current interest rate at 5.0%.
The US Dollar Index (DXY) hovers around 103.80, as it seeks direction amidst improved US Treasury yields. However, the US Dollar (USD) faced downward pressure due to the contraction observed in the United States manufacturing sector in February.
The US ISM Manufacturing PMI for February dropped to 47.8 from 49.1, significantly missing the market expectation of 49.5. Additionally, the US Michigan Consumer Sentiment Index declined to 76.9 in February, falling below the market expectation of remaining unchanged at 79.6.
Despite these concerning data points, Federal Reserve (Fed) officials have maintained a cautious stance and have not signaled any immediate interest rate cuts. This stance has provided some support for the US Dollar.
Investors are closely monitoring upcoming economic data releases, including the ISM Services PMI data, ADP Employment Change, and Nonfarm Payrolls for February, to gauge the overall health of the US economy and potential future monetary policy decisions by the US Federal Reserve.
USD/CAD fumbled the 1.3600 handle on Friday after a worse-than-expected US ISM Manufacturing Purchasing Managers Index (PMI) for February unexpectedly declined. The US Dollar (USD) was dragged broadly lower, sending the USD/CAD pair back into familiar technical territory near 1.3550.
Canada saw a decline in its S&P Global Manufacturing PMI on Friday, but market attention was focused on the day’s key US data print. Next week brings the latest rate call from the Bank of Canada (BoC) slated for next Wednesday, and next week will wrap up with another US Nonfarm Payrolls (NFP) on Friday alongside Canadian labor figures.
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the Australian Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | -0.23% | -0.16% | -0.14% | -0.47% | 0.07% | -0.31% | 0.01% | |
EUR | 0.25% | 0.09% | 0.09% | -0.22% | 0.33% | -0.07% | 0.26% | |
GBP | 0.16% | -0.08% | -0.01% | -0.31% | 0.24% | -0.14% | 0.17% | |
CAD | 0.14% | -0.06% | 0.02% | -0.28% | 0.24% | -0.14% | 0.17% | |
AUD | 0.47% | 0.23% | 0.30% | 0.28% | 0.55% | 0.16% | 0.48% | |
JPY | -0.08% | -0.31% | -0.23% | -0.24% | -0.54% | -0.37% | -0.06% | |
NZD | 0.31% | 0.07% | 0.12% | 0.15% | -0.16% | 0.38% | 0.28% | |
CHF | -0.01% | -0.25% | -0.17% | -0.18% | -0.48% | 0.07% | -0.32% |
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 fell from an intraday high near 1.3600 to retest 1.3550 on Friday as the pair continues to grapple with near-term consolidation. A heavy supply zone at the 1.3600 handle is keeping bullish momentum pinned.
Higher highs are keeping daily candlesticks on the bullish side, but USD/CAD continues to wrestle with the 200-day Simple Moving Average (SMA) at 1.3477. A lack of topside momentum could drag the pair back into consolidation at the long-term moving average if buyers can’t break the 1.3600 level decisively.
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.
There is a risk that the BoC will turn a notch more dovish at the March meeting. Thus, the Canadian Dollar (CAD) could come under pressure in the next week, economists at ING say.
Policymakers are now looking at a pretty mixed bag when it comes to data. Crucially, the unwinding of rate cut bets in Canada appears much more a consequence of rebounding Fed rate expectations than domestic factors. Ultimately, we think the market is underpricing both Fed and BoC easing cycles, but March may be too early for a big dovish repricing.
We expect next week’s BoC meeting to be of relatively limited relevance for markets. There is a risk that the message turns a bit more dovish (opening more explicitly to rate cuts) and hits CAD, but that should not change the picture dramatically for the Loonie considering how much BoC expectations are tied to Fed pricing.
We expect a stable USD/CAD in March before a USD-led decline in the pair materialises from the second quarter.
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