Canadian Dollar retreats following upbeat US manufacturing activity
- Canadian Dollar is losing momentum with strong US macroeconomic data boosting Greenback.
- Canadian S&P Manufacturing PMI fails to support Loonie.
- The BoC’s Consumer Expectations Survey shows a moderate improvement on the economic outlook.
The Canadian Dollar (CAD) has opened the week on its back foot against a somewhat stronger US Dollar. Upbeat US manufacturing activity data and the softer crude prices are weighing on the Loonie in a thin market session as most European markets are closed on the Monday following Easter.
The US ISM Manufacturing index has shown levels above 50 for the first time since October 2022. These figures suggest an unexpected expansion of the sector’s activity in March and have been combined with improvements in all sub-indices with the prices component increasing at its fastest pace in almost two years, suggesting a positive contribution to inflation.
Earlier today, the Canadian S&P Manufacturing PMI remained little changed in March to complete a whole year of contraction in the sector’s activity. Apart from that, the Bank of Canada’s Consumer Expectations Survey revealed that confidence in the economy has improved while inflation is expected to remain high.
Daily digest market movers: USD/CAD bounces up on bright US data
- Canadian Dollar trades lower on Monday with the US Dollar favoured by upbeat US macroeconomic data.
- US ISM Manufacturing PMI has increased to 50.3 in March from 47.8 in February, beating market expectations of a 48.4 reading.
- Prices Paid in the manufacturing sector have surged to 55.8, their highest level since July 2022.
- Canadian S&P Manufacturing PMI has ticked up to 49.8 from 49.7 in February.
- Oil prices have pulled back from YTD highs at $83.65, which has added negative pressure to the commodity-linked CAD.
- On Friday, US PCE Prices Index grew at a 0.3% monthly pace in February, 2.5% YoY. The market was expecting a 0.4% monthly increase.
- US Consumer spending jumped 0.8% in February from 0.2% in January, well above the 0.5% increase anticipated by market experts.
- This week a slew of Fed speakers are likely to give further hints regarding the monetary policy outlook ahead of Friday’s Nonfarm Payrolls report.
Canadian Dollar price today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.53% | 0.71% | 0.39% | 0.71% | 0.20% | 0.70% | 0.33% | |
| EUR | -0.53% | 0.19% | -0.13% | 0.19% | -0.33% | 0.16% | -0.20% | |
| GBP | -0.72% | -0.19% | -0.33% | 0.00% | -0.53% | -0.01% | -0.40% | |
| CAD | -0.39% | 0.14% | 0.31% | 0.32% | -0.20% | 0.30% | -0.08% | |
| AUD | -0.72% | -0.19% | 0.00% | -0.32% | -0.52% | -0.02% | -0.39% | |
| JPY | -0.21% | 0.35% | 0.51% | 0.20% | 0.54% | 0.50% | 0.12% | |
| NZD | -0.70% | -0.17% | 0.01% | -0.29% | 0.02% | -0.51% | -0.38% | |
| CHF | -0.33% | 0.21% | 0.40% | 0.08% | 0.40% | -0.12% | 0.38% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical analysis: The USD has scope for further appreciation to 1.3615
The USD/CAD regained positive traction on Monday, underpinned by the strong US macroeconomic data that endorses the “soft landing” rhetoric and opens cracks in the market view tat anticipates three rate hikes in 2024.
The pair keeps trading within a slightly bullish channel. The rebound from last week’s lows has breached resistance at 1.3565, which gives buyers hope to extend gains toward 1.3615 and the top of the channel at 1.3632. Supports are 1.3520 and 1.3470.
USD/CAD 4-Hour Chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.