- The Canadian Dollar takes another step higher following Tuesday’s gains.
- Business and intermediary sales in Canada see slight recovery.
- Loonie gains get capped by declining Crude Oil bids.
The Canadian Dollar (CAD) is seeing additional gains on Wednesday, eking out an extension as broader markets chew on their recent bout of risk-on sentiment.
Wholesale and business sales figures in Canada saw an improvement over forecasts, helping to bolster the Loonie. Meanwhile, declines in Crude Oil prices are keeping CAD gains on a tight leash.
Daily Digest Market Movers: Canadian Dollar easing higher as Loonie bulls squeeze out a little more
Loonie steps into second-straight day of gains against the US Dollar (USD).
Canadian Manufacturing Sales in September beat the street, printing at 0.4% against the -0.1% forecast, but slipping back from August’s 1.0% (revised up from 0.7%).
Wholesale sales for September softened significantly but still beat flat forecast to print at 0.4%, down from the previous month’s 1.8% (revised down from 2.3%).
US data didn’t quite meet the street’s expectations as Retail Sales for October declined from a revised 0.9% in September to -0.1%, contracting but still holding above forecast -0.3%.
Annualized US Core Producer Price Index (PPI) Ex Food & Energy for the year into October also came in below expectations, printing at 2.4% against the forecast of 2.7%.
Crude Oil is seeing some declining prices on Wednesday, limiting CAD gains.
Thursday brings Canadian Housing Starts and changes in employment insurance benefits recipients.
Technical Analysis: Canadian Dollar looking to round out additional topside gains against the Greenback
An additional day of gains for the Canadian Dollar (CAD) against the US Dollar (USD) is bringing the USD/CAD back down from the 1.3700 handle. The pair is testing support barriers near 1.3650, and technical indicators are leaning toward the downside.
The USD/CAD is seeing some back-and-forth movement on the intraday level as the pair tests the 50-day Simple Moving Average (SMA) sitting just north of 1.3650. A break of this level will open up the door for a deeper bear run toward the 200-day SMA at the 1.3500 handle.
The Relative Strength Index (RSI) has crossed into the bottom half of the 50.0 line, inching toward oversold conditions, but there’s still plenty of room left to run in the indicator.
Wednesday’s additional declines in the USD/CAD sets the pair up for a firm break of a rising trendline, though rejection from here would set the Loonie on the path for a return to losses.
USD/CAD Daily Chart
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 Pound Sterling.
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).
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.