The Canadian Dollar (CAD) had a mixed performance on Monday, climbing against the US Dollar (USD) due to a quiet US market session. With Memorial Day holiday keeping US markets dark, volumes in the market were thin and CAD traders had to wait for meaningful data prints. Canada does not have much on the economic calendar until Friday when the GDP release is expected. The Canadian Current Account for the first quarter is expected to decline, while the GDP is forecasted to ease compared to the previous month. However, the release of key US inflation figures at the same time might overshadow the Canadian GDP.
Despite the lack of major economic events in Canada early in the week, the Canadian Dollar was able to gain ground on Monday due to fresh weakness in safe-haven currencies. A StatCan flash estimate showed a rise in wholesale trade in Canada in April, which was a positive sign for investors concerned about a potential recession in the Canadian economy. The release of Canadian Industrial Product Prices and Canadian Raw Material Price Index is expected to show slower growth compared to the previous month. Tuesday will also see key Federal Reserve policymakers speaking, impacting market flows.
In terms of percentage change against major currencies, the Canadian Dollar was the strongest against the US Dollar on Monday. The technical analysis shows that the CAD is broadly mixed, gaining against the USD and JPY but falling against the AUD and NZD. USD/CAD fell back into congestion on Monday and is expected to face technical support near the 1.3600 handle. The risk sentiment in the market determines whether investors are willing to take risks or play it safe. During periods of “risk-on”, stock markets and commodities rise, benefiting currencies of commodity-exporting nations like AUD, CAD, and NZD.
On the other hand, in a “risk-off” market, bonds and safe-haven currencies such as JPY, CHF, and USD tend to gain. The US Dollar benefits during times of crisis as investors turn to US government debt, which is seen as safe. The Japanese Yen sees increased demand for government bonds, while the Swiss Franc attracts investors due to strict banking laws offering capital protection. Overall, the performance of the Canadian Dollar is influenced by various factors such as economic data releases, market sentiment, and movements in other major currencies.
