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  • Canadian Dollar trends broadly lower after brief rally.
  • Canada added more jobs than expected in January.
  • Canadian wage growth in January continues to ease.

The Canadian Dollar (CAD) slipped back after testing higher on Friday. Markets readjusted exposure to the US Dollar (USD) after the US Bureau of Labor Statistics (BLS) introduced broad seasonal adjustment changes to how the Consumer Price Index (CPI) is calculated, causing slight changes to near-term inflation prints.

Canadian wage figures eased further in January, and net job additions showed a higher number of job gains than markets forecast, while December’s jobs number also saw an upside revision. The Canadian Unemployment Rate also ticked lower in January.

Daily digest market movers: Canadian Dollar falling back despite economic calendar beats

  • Canada’s Unemployment Rate declined to 5.7% in January versus the forecast 5.9%, December’s 5.8%.
  • Net Change in Employment added 37.3K new jobs in January, handily beating the forecast of 15K.
  • December’s job additions also saw an upside revision to 12.3% from 0.1K.
  • Canadian Average Hourly Wages declined to 5.3% in January from the previous month’s 5.7%.
  • The US BLS brought far-reaching adjustments to how the CPI is seasonally-adjusted, causing an uptick in adjusted annualized US inflation, though recent inflation measures remain largely unchanged.
  • With the adjustments out of the way, markets will focus on next week’s US CPI inflation print due on Tuesday.
  • Next week sees a thin, low-impact economic calendar for Canada, exposing the Loonie to broad-market flows.

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   -0.09% -0.09% -0.01% -0.41% 0.01% -0.72% 0.14%
EUR 0.09%   0.00% 0.08% -0.32% 0.11% -0.63% 0.23%
GBP 0.10% 0.00%   0.09% -0.32% 0.11% -0.62% 0.24%
CAD 0.01% -0.09% -0.10%   -0.41% 0.01% -0.72% 0.14%
AUD 0.42% 0.33% 0.32% 0.41%   0.43% -0.31% 0.55%
JPY -0.01% -0.10% -0.09% -0.03% -0.45%   -0.71% 0.14%
NZD 0.72% 0.62% 0.62% 0.70% 0.30% 0.73%   0.85%
CHF -0.13% -0.22% -0.23% -0.14% -0.54% -0.12% -0.86%  

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 sheds weight against US Dollar after early rise 

The Canadian Dollar is broadly lower on Friday, dipping into the red against the majority of its major currency peers with the New Zealand Dollar (NZD) leading the charge, gaining three-quarters of a percent against the CAD, while the Australian Dollar (AUD) sees four-tenths of a percent in gains against the Canadian Dollar.

The Canadian Dollar rallied early against the US Dollar, sending the USD/CAD into a near-term low of 1.3413 before a rally in the USD sent the pair back into the high end near 1.3480. The pair has rallied half a percent bottom-to-top on Friday, keeping the USD/CAD pinned into near-term congestion.

The USD/CAD continues to trade into the 200-day Simple Moving Average (SMA) near 1.3475, and bidders will be looking to drive the pair back into the last meaningful swing high at 1.3900 last November. On the low side, sellers will be looking for a return to December’s bottom bids near 1.3200.

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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