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- Canadian Dollar backslides further despite better than expected Retail Sales on Friday
Canadian Dollar backslides further despite better than expected Retail Sales on Friday
- The Canadian Dollar gives up further ground to the Greenback.
- Canada Retail Sales ease from previous figures but less than expected.
- Next week: Canada & US GDP figures to drive USD/CAD.
The Canadian Dollar (CAD) shed further weight against the US Dollar (USD) on Friday as market participants readjust their Greenback exposure in quiet Friday trading. Investors have pared back nearly all of the gains made during the midweek splurge sparked by rate cut bet hopes after the Federal Reserve (Fed) nodded toward higher odds of rate cuts to come.
Canada revealed a slight slide in Retail Sales figures in January. Fed Chairman Jerome Powell made few waves during his first public appearance since Wednesday’s Federal Open Market Committee (FOMC) press conference. Next week, Gross Domestic Product (GDP) figures from Canada and the US are expected but not until Thursday.
Canadian economic calendar events remain thin on the data docket until then, and next week will close out with another print of the Fed’s preferred inflation gauge, the Personal Consumption Expenditure (PCE) Price Index on Friday.
Daily digest market movers: CAD slips further as Greenback extends
- The Canadian Dollar is down around half of a percent against the US Dollar on Friday.
- Canadian MoM Retail Sales in January declined, but less than expected, printing at -0.3% versus the forecast of -0.4%. Canadian Retail Sales in December grew 0.9%.
- MoM Core Retail Sales, or Retail Sales excluding Automobiles, grew 0.5%, keeping well above the forecast of -0.4% but cooling slightly from the previous month’s 0.6%.
- Fed Chair Powell spoke at a Fed Listens event in Washington, DC. Markets monitored the speech for any qualifications or adjustments to the Fed head’s stance compared to Wednesday’s rate call, but Powell avoided discussing monetary policy.
- Next week:
- Canadian GDP is expected to tick upwards to 0.4% from 0.0%.
- US GDP is expected to stand pat at 3.2% in Q4.
- US (PCE) Price Index is expected to tick down to 0.3% from 0.4% MoM.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.50% | 0.48% | 0.54% | 0.82% | -0.17% | 0.85% | 0.12% | |
| EUR | -0.50% | -0.02% | 0.06% | 0.32% | -0.67% | 0.35% | -0.37% | |
| GBP | -0.48% | 0.02% | 0.08% | 0.34% | -0.65% | 0.38% | -0.36% | |
| CAD | -0.56% | -0.06% | -0.07% | 0.28% | -0.73% | 0.29% | -0.43% | |
| AUD | -0.81% | -0.32% | -0.35% | -0.28% | -0.99% | 0.03% | -0.70% | |
| JPY | 0.17% | 0.66% | 0.65% | 0.72% | 0.98% | 1.03% | 0.29% | |
| NZD | -0.86% | -0.36% | -0.39% | -0.29% | -0.02% | -1.02% | -0.73% | |
| CHF | -0.10% | 0.39% | 0.38% | 0.45% | 0.71% | -0.27% | 0.74% |
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 gives up against Greenback, slumps back to familiar lows
The Canadian Dollar (CAD) fell into recent lows against the US Dollar on Friday, extending Thursday’s decline as the broader market scooped the safe-haven Greenback up once more after Wednesday’s overly enthusiastic plunge. The USD/CAD pair is back into the 1.3600 region and challenging the week’s technical highs.
USD/CAD is running up against a supply zone between 1.3600 and 1.3620, and the pair has completely pared away the Greenback’s midweek plunge, climbing nearly 1.2% bottom-to-top from Thursday’s early bottom bids of 1.3451. Despite consolidation, USD/CAD is on pace to set fresh highs for 2024 north of 1.3613, the fresh high set early this week.
USD/CAD continues to churn close to the 200-day Simple Moving Average (SMA) near 1.3488, and bidders will be looking to price in a technical floor from the 1.3500 handle. On the downside, the last swing low into 1.3450 will be the level to beat for short sellers looking to force the Greenback lower once more.
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.
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