Canadian Dollar nudged higher as USD softens in calm Monday session
- Canadian Dollar picks up with the USD losing ground in a risk-on session.
- Investors are looking for the sidelines ahead of Wednesday’s US CPI and BoC rate decision.
- USD/CAD keeps its positive trend intact with CAD recovery attempts limited.
The Canadian Dollar (CAD) is trading moderately higher on Monday, extending the rebound from the year-to-date lows after Friday’s upbeat Ivey PMI offset the negative impact of upbeat US Nonfarm Payrolls. A modest appetite for risk on a very calm weekly opening is allowing some US Dollar pullback, ahead of key macroeconomic data this week.
The US economy created far more jobs than expected in March, while wage growth moderated, although it is still at levels inconsistent with the Federal Reserve’s (Fed) 2% core inflation target for price stability. Last week, Fed officials hinted at a hawkish demeanor on the back of the recent data, which is expected to keep the US Dollar’s downside attempts limited.
Investors, however, are looking for the sidelines on Monday, awaiting the US CPI figures on Wednesday to check whether the recent uptick on inflation is an exception or a structural trend. Also on Wednesday, the Bank of Canada (B0C) will release its monetary policy decision. There is a minor risk of an unexpected rate cut that would send the CAD tumbling.
Daily digest market movers: USD/CAD ticks up in a quiet market
- The Canadian Dollar barely moves on Monday, still paring some losses after having hit four-month lows on Friday.
- The highlight of the week is the US CPI due on Wednesday. US headline inflation is expected to have increased 0.3% and 3.4% from a 0.4% monthly increment and a 3.2% year-on-year reading in February.
- The core CPI is seen easing to 0.3% in March, from 0.4% in February, with the yearly rate cooling to 3.7% from 3.8%.
- Also on Wednesday, the BoC is expected to leave its benchmark index unchanged at 5%. The main interest will be on any hints toward the timing of the first rate cut.
- On Friday, US Nonfarm Payrolls increased by 303K in March from 270K in February, well above the 200K forecasted by market experts.
- Average Hourly Earnings increased at a 0.3% monthly pace and 4.1% YoY from 0.2% and 4.3%, respectively, in February.
- Canadian Ivey Purchasing Managers Index has improved to 57.7, its best reading over the last 12 months, from 53.9 in February.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF |
| USD | -0.20% | -0.22% | -0.16% | -0.47% | 0.08% | -0.43% | 0.22% |
| EUR | 0.20% | -0.02% | 0.05% | -0.26% | 0.27% | -0.22% | 0.40% |
| GBP | 0.21% | 0.02% | 0.08% | -0.25% | 0.30% | -0.20% | 0.42% |
| CAD | 0.14% | -0.08% | -0.07% | -0.31% | 0.22% | -0.27% | 0.38% |
| AUD | 0.46% | 0.26% | 0.24% | 0.30% | 0.53% | 0.04% | 0.65% |
| JPY | -0.09% | -0.28% | -0.29% | -0.24% | -0.55% | -0.49% | 0.14% |
| NZD | 0.43% | 0.22% | 0.21% | 0.27% | -0.04% | 0.50% | 0.63% |
| CHF | -0.21% | -0.41% | -0.43% | -0.35% | -0.69% | -0.14% | -0.63% |
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: USD/CAD remains biased higher despite failure to break the channel top at 1.3645
Technical indicators show the US Dollar on a bullish trend, with the structure of higher highs and higher lows intact. The pair was rejected on Friday at the top of the ascending channel, now at 1.3645, but the ensuing Canadian Dollar rebound remains unable to extend past the main SMAs.
The pair has a support area at 1.3555, where the confluence of the 4-hour 50 and 100 SMAs are likely to hold bears off. Below here, the next targets are at 1.3485 and 1.3420. Resistances are at the mentioned 1.3645 and 1.3680.
USD/CAD 4-Hour Chart
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
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