- Canadian Dollar hits eight-week low after US PMI surge.
- Canada sees BoC Governor Macklem slated for Tuesday.
- US Fed policymaker statements weigh on Monday markets.
The Canadian Dollar (CAD) is broadly lower on Monday after a broad market dogpile into the US Dollar (USD) after US ISM Services Purchasing Managers Index (PMI) figures came in well above expectations. Additionally, mixed comments from US Federal Reserve (Fed) policymakers risk investor outlooks, hampering risk appetite.
Bank of Canada (BoC) Governor Tiff Macklem is slated to speak and answer questions regarding monetary policy transmission in Quebec on Tuesday, leaving the Canadian Dollar absent meaningful domestic releases on Monday.
Daily digest market movers: Canadian Dollar backslides as markets readjust expectations
- US data, Fedspeak dominates currency flows on Monday with Canada absent on the economic calendar.
- The US ISM Services PMI for January climbed to 53.4 versus the forecast of 52.0, accelerating above the previous month’s 50.5, which saw only minor revisions.
- US ISM Services Prices Paid hit an 11-month high as businesses continue to see inflationary pressure in January, up sharply from December’s 56.7 (revised down from 57.4).
- US ISM Services New Orders Index rebounds to 55 in January from December’s 52.8 as economic activity continues to stubbornly vex markets, which hope for earlier rate cuts.
- Minneapolis Fed President Neel Kashkari noted on Monday that higher neutral rates might mean that monetary policy may not be as tight as previously thought.
- Fed’s Kashkari also noted that despite broadly positive US data, some weak points remain, notably rising consumer delinquencies.
- Chicago Fed President Austan Goolsbee pulled up short of Fed Kashkari’s earlier statements, noting that while he needs to see more inflation progress in the data itself, he won’t rule out a March rate cut entirely.
- The CME’s FedWatch Tool sees money markets pricing in barely a 15% chance of a rate cut in March.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.35% | 0.70% | 0.52% | 0.35% | 0.11% | 0.16% | 0.40% | |
| EUR | -0.35% | 0.34% | 0.17% | -0.01% | -0.25% | -0.19% | 0.04% | |
| GBP | -0.70% | -0.34% | -0.17% | -0.36% | -0.60% | -0.54% | -0.30% | |
| CAD | -0.52% | -0.17% | 0.17% | -0.19% | -0.43% | -0.37% | -0.13% | |
| AUD | -0.35% | 0.02% | 0.36% | 0.19% | -0.24% | -0.18% | 0.05% | |
| JPY | -0.11% | 0.24% | 0.58% | 0.42% | 0.24% | 0.05% | 0.29% | |
| NZD | -0.15% | 0.20% | 0.54% | 0.37% | 0.19% | -0.07% | 0.24% | |
| CHF | -0.39% | -0.04% | 0.31% | 0.12% | -0.04% | -0.28% | -0.23% |
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 softens across the board, USD/CAD tests eight-week highs
The Canadian Dollar (CAD) sees broad losses on Monday as the Loonie sheds weight against nearly all of its major currency peers in the new trading week. The CAD is sharply lower against the US Dollar, down half a percent on Monday, with the CAD shedding a third of a percent against the Japanese Yen (JPY) and a quarter of a percent against the New Zealand Dollar (NZD). Despite broad selling pressure, the CAD still gained a quarter of a percent against the Pound Sterling (GBP), Monday’s weakest-performing currency, forcing the Canadian Dollar to settle for second-worst.
The Canadian Dollar’s declines on Monday sees the USD/CAD testing back over the 1.3500 handle, running into near-term technical resistance at familiar intraday swing highs near 1.3540.
Monday’s USD/CAD surge sees the pair trading back into the high end of the 200-day Simple Moving Average (SMA) below the 1.3500 handle, and the pair is pushing into eight-week highs with an immediate technical ceiling weighing down from 1.3600.
USD/CAD hourly chart
USD/CAD daily chart
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Read More:Canadian Dollar extends decline as markets pile into Greenback
2024-02-05 21:02:41