The Canadian Dollar (CAD) showed a mixed performance on Wednesday, climbing one-third of one percent against the US Dollar (USD) after a series of disappointing data releases from the US. The rate cut hopes are increasing as the US ISM Purchasing Managers Index (PMI) activity figures show a sharp decline, with over 70% odds of a rate cut by the Federal Reserve (Fed) in September. Canada remained unaffected by low-tier trade balance figures, but Friday’s labor data release is expected to bring more volatility to the market.
In the US, economic indicators like the ISM Services PMI showed a decline, with the Services Purchasing Managers Index dropping to 48.8, the lowest since 2020. The decline in business activity is seen as a bearish sign for the USD. Additionally, US ADP Employment Change figures also fell below expectations, leading to a decrease in the US Dollar’s value. As a result, the CAD managed to strengthen against the USD and other major currencies.
The performance of the Canadian Dollar (CAD) against other major currencies can be seen in the table provided. The CAD was the strongest against the Japanese Yen on that day. Technical analysis shows that the CAD found higher ground against the USD and the JPY, but declined against the AUD and GBP. The USD/CAD pair continued to show volatility, with the CAD climbing one-third of one percent against the USD.
Key factors that influence the Canadian Dollar include interest rates set by the Bank of Canada (BoC), the price of Oil, the health of the economy, inflation, and the Trade Balance. The Bank of Canada plays a significant role in setting interest rates, which in turn affects the CAD. The price of Oil, Canada’s largest export, also impacts the CAD value, with higher prices leading to an increase in the CAD value. Inflation, macroeconomic data releases, and market sentiment also play a role in determining the direction of the CAD.
Overall, the Canadian Dollar’s performance was saved by the stumbling Greenback on Wednesday, with the CAD managing to strengthen against the USD amid disappointing US economic data. With rate cut hopes increasing, the CAD is expected to remain volatile in the coming days, especially with the release of key labor data on Friday. Traders and investors will be closely monitoring these developments to gauge the future direction of the Canadian Dollar in the forex market.
