The Canadian Dollar (CAD) experienced a mixed performance on Wednesday, with some easing against the US Dollar. Fedspeak continued to dominate investor focus, with markets eagerly awaiting key economic figures scheduled for release later in the week. Thursday will see the unveiling of US Durable Goods Orders, Initial Jobless Claims, and US Gross Domestic Product (GDP) figures, followed by Canadian MoM GDP and US Personal Consumption Expenditure Price Index (PCE) inflation data on Friday.
Statistics Canada (Statscan) issued a warning about a potential contraction in wholesale trade activities in May, following a modest increase in April. The flash estimate provided by Statscan serves as a preview of the final figure set to be published on July 15. The decline in wholesale sales is expected to have a ripple effect on the upcoming Canadian GDP print, forecasted to rise to 0.3% MoM in April after stagnating at 0.0% previously. In addition, US New Home Sales in May witnessed a significant decline of -11.3% MoM, marking the sharpest downside correction since July 2022, indicating subdued housing activity.
The table below shows the percentage change of the Canadian Dollar against other major currencies on Wednesday. The Canadian Dollar remained relatively strong against the Japanese Yen, while experiencing fluctuations against other currencies. The technical analysis of the Canadian Dollar shows a slump back to 1.3700 against the Greenback, with the USD/CAD pair hovering around the 200-hour Exponential Moving Average and daily candlesticks snapping a near-term losing streak. The medium-term consolidation pattern continues above the 200-day EMA, suggesting potential stabilization in the coming days.
Key factors influencing the Canadian Dollar include interest rates set by the Bank of Canada, the price of Oil, the health of the economy, inflation, and the Trade Balance. The Bank of Canada plays a crucial role in adjusting interest rates to maintain inflation levels within the target range of 1-3%. Oil prices, as Canada’s primary export, directly impact the value of the Canadian Dollar, with higher prices typically leading to a stronger CAD. Inflation, traditionally seen as negative for a currency, can actually attract foreign investment and boost demand for the Canadian Dollar in modern times. Macroeconomic data releases, such as GDP figures and employment data, provide insights into the health of the economy and can influence the direction of the CAD.
In conclusion, the Canadian Dollar’s performance against the Greenback and other major currencies has been mixed, with various economic indicators and Fedspeak driving market sentiment. With key data releases on the horizon, investors are closely monitoring developments in wholesale trade activities and upcoming GDP prints. The influence of factors such as interest rates, Oil prices, inflation, and macroeconomic data on the Canadian Dollar’s value underscores the importance of staying informed and vigilant in navigating currency fluctuations.
