The Canadian Dollar is experiencing a decline on Wednesday as the safe-haven US Dollar gains strength, supported by lackluster bid-to-cover ratios in a US Treasury auction. With Canada absent from the economic calendar for the day, investors are looking ahead to Thursday’s Canadian Current Account update, expected to fall to -5.5 billion after reaching a six-month high of -1.62 billion in the previous quarter. Following this, the Canadian Q1 Gross Domestic Product data is set for release on Friday, expected to show a 0.0% MoM growth versus 0.2%. However, Canadian data may be overshadowed by upcoming US releases, including US GDP on Thursday and Personal Consumption Expenditure Price Index inflation on Friday.
The market sentiment remains cautious as investors navigate the declining bid-to-cover ratios on US Treasuries this week, prompting a broader support for the US Dollar and pushing the Canadian Dollar lower. The focus is on a 7-year note auction in the US session, where a bid-to-cover below 2.44 could further shift sentiment towards risk-off. The market will also be monitoring US quarterly GDP and PCE inflation in the latter part of the week, with US Q1 GDP expected to ease to 1.3% and Core PCE inflation expected to hold steady at 0.3% MoM.
According to the percentage change data, the Canadian Dollar is weakest against the US Dollar today, with a decline of 0.46%. Technical analysis indicates that the Canadian Dollar is struggling to hold its ground against the Australian Dollar and is losing strength against all other major currency peers. The USD/CAD pair is showing a nearly 0.7% climb from the last swing low, with choppy trading limiting topside momentum beyond 1.3740. Daily candles on the chart suggest a technical rebound from the 50-day Exponential Moving Average, but long-term bullish momentum is restricted as USD/CAD remains down from the year’s peak bids.
Key factors that influence the Canadian Dollar include interest rates set by the Bank of Canada, the price of Oil, the health of the Canadian economy, inflation, and the Trade Balance. The Bank of Canada plays a significant role in influencing the CAD through interest rate adjustments to maintain inflation levels. The price of Oil, as Canada’s major export, directly impacts the CAD value. Higher Oil prices generally lead to a stronger CAD. Inflation, which can attract foreign capital inflows, is also a factor affecting the Canadian Dollar. Macroeconomic data releases, such as GDP and employment figures, can also impact the CAD depending on the health of the economy.
In conclusion, the Canadian Dollar is facing downward pressure as the US Dollar gains momentum as a safe-haven currency. With key data releases and events expected later in the week, including the Canadian Current Account and GDP updates, the market remains cautious. Investors will continue to monitor the US Treasury auctions, GDP, and inflation data, along with technical indicators for the CAD’s performance against other major currencies. The Canadian Dollar’s value will be influenced by a combination of domestic economic factors, global market sentiment, and external events affecting currency markets.
