The Canadian Dollar (CAD) is on the rise as broad market flows in the Greenback dictate overall sentiment. In the first quarter, Canada saw a decline in its Current Account, but the figures were better than expected, boosting the CAD. Meanwhile, US GDP growth in the first quarter cooled as predicted, raising hopes for potential rate cuts by the Federal Reserve (Fed).
On Thursday, the Canadian Dollar rebounded, recovering ground lost earlier in the week. The Q1 Current Account numbers revealed a contraction of -5.37 billion, worse than the previous quarter but better than median market estimates. This provided support to the CAD. In comparison, US GDP growth in Q1 eased to 1.3%, in line with expectations, sparking discussions of further rate cuts by the Fed.
The Canadian Dollar was pushed higher by broad Greenback selling. The Q1 Current Account figures for Canada showed a decline of -5.37 billion compared to the previous quarter, but were better than forecasted. US GDP growth in Q1 also decreased to 1.3%, aligning with market forecasts. Weak US economic indicators fueled hopes of inflation easing and potential rate cuts.
The Canadian Dollar has made gains against the Swiss Franc but remains relatively weak against other major currencies. With USD/CAD hovering near 1.3660, there is resistance at the 200-hour EMA at 1.3670. The technical charts show a consolidation pattern with support from the 50-day EMA at 1.3646, and long-term support at the 200-day EMA at 1.3557.
Key factors driving the Canadian Dollar include interest rates set by the Bank of Canada, Oil prices, the economy’s health, inflation, and the Trade Balance. The Bank of Canada influences the CAD by adjusting interest rates, maintaining inflation levels, and using quantitative easing or tightening. Oil prices impact the CAD due to Canada’s reliance on Oil exports.
Inflation, economic indicators, and market sentiment also play a role in influencing the Canadian Dollar. High inflation can lead to higher interest rates, attracting capital inflows and increasing demand for the CAD. Strong economic data is positive for the CAD, attracting foreign investment and potentially leading to higher interest rates. Conversely, weak economic data can cause the CAD to lose value.
