- The Canadian Dollar fell back early Wednesday as market sentiment sours on multiple fronts.
- US data is depleting risk appetite, Crude Oil dips but tries to recover.
- USD/CAD hits a new high for the week as the US Dollar bids higher.
The Canadian Dollar (CAD) saw declines across the board on Wednesday, getting dragged down as Crude Oil sold off and broader markets stepped back into the US Dollar (USD) following a slew of US economic data that points to interest rates remaining higher for longer than markets anticipated at the start of the week.
Loonie traders will be looking ahead to Friday’s Retail Sales figures from Canada, but the figures are likely to be overshadowed by US Purchasing Managers’ Index (PMI) figures due shortly after.
US markets are also expected to see some volume on Wednesday as investors gather up their order books in anticipation of Thursday’s Thanksgiving holiday.
Daily Digest Market Movers: Canadian Dollar driven lower as Crude Oil declines and US Dollar flows reverse
- CAD sees fresh lows for the week, falling back on declining market sentiment.
- Crude Oil markets are firmly lower for the week, WTI fell below $75/barrel before trying to recover bids.
- The Organization of Petroleum Exporting Countries delayed a critical meeting on production cuts until next Thursday.
- Saudi Arabia is reportedly dissatisfied with member states’ unwillingness to stick to reduced production quotas.
- The meeting is for OPEC member state finance ministry staff and specifically focuses on production cut plans.
- Record non-OPEC production and ongoing demand concerns from China are increasing expectations of additional OPEC production cuts.
- US Initial Jobless Claims declined to a five-week low of 209K against the 225K forecast, highlighting still tight labor conditions in the US.
- The University of Michigan Consumer Inflation Expectations for November showed US consumers broadly expect long-term inflation to remain above the Federal Reserve’s (Fed) 2% target as consumers see 3.2% inflation.
- Inflation expectations tend to drive realized inflation, and elevated expectations mean the Fed was right to maintain a hawkish approach.
- Investors hoping for an accelerated path for rate cuts will be left out in the cold by elevated price growth expectations.
Canadian Dollar price this week
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies this week. Canadian Dollar was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.27% | -0.18% | 0.00% | -0.35% | -0.21% | -0.31% | -0.13% | |
| EUR | -0.27% | -0.46% | -0.28% | -0.62% | -0.48% | -0.58% | -0.41% | |
| GBP | 0.17% | 0.46% | 0.18% | -0.17% | -0.02% | -0.13% | 0.06% | |
| CAD | 0.00% | 0.28% | -0.18% | -0.34% | -0.21% | -0.31% | -0.13% | |
| AUD | 0.34% | 0.62% | 0.17% | 0.35% | 0.14% | 0.04% | 0.21% | |
| JPY | 0.22% | 0.50% | -0.21% | 0.20% | -0.14% | -0.10% | 0.07% | |
| NZD | 0.31% | 0.57% | 0.13% | 0.31% | -0.03% | 0.10% | 0.18% | |
| CHF | 0.13% | 0.41% | -0.05% | 0.13% | -0.21% | -0.08% | -0.18% |
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 tests new low for the week, Loonie traders looking for a mid-day recovery
The Canadian Dollar (CAD) saw fresh declines against the US Dollar (USD) on Wednesday, driving to a new low for the week and sending the USD/CAD into 1.3765 before staging a mild intraday recovery towards the 1.3700 handle.
The Loonie is now experiencing a mild recovery, dragging the USD/CAD back down below 1.3750. The pair saw a technical rejection of the 200-hour Simple Moving Average (SMA) and is now in play 1.3740.
The USD/CAD continues to get snarled on the high side of the rising trendline from 1.3100, and the 50-day SMA is providing technical support for any bearish moves into 1.3640.
USD/CAD Hourly Chart
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USD/CAD Daily Chart
USD/CAD Daily Chart
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Read More:Canadian Dollar returns to Wednesday’s opening bids after an early drop on Crude Oil weakness
2023-11-22 20:08:27
