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Canadian Dollar softens on Thursday in pre-NFP market churn

  • Canadian Dollar sees slim improvement on Thursday as Crude Oil flattens.
  • Canada saw an improvement in Manufacturing PMIs for January.
  • Markets gear up for another US NFP on Friday.

The Canadian Dollar (CAD) is mostly firmer against a basket of major currencies on Thursday and sees some gains against the US Dollar (USD). Markets are settling following Wednesday’s Federal Reserve (Fed) outing that saw Fed Chairman Jerome Powell strike a much more hawkish tone than many investors expected. This knocked equity markets lower and drove risk-off flows into the safe haven US Dollar.

Canada saw an uptick in the S&P Global Manufacturing Purchasing Managers Index (PMI) for January, but the indicator of production confidence remains in contractionary, sub-50.0 territory. US ISM Manufacturing PMIs likewise printed above expectations, but similarly remain below 50.0. US Initial Jobless Claims unexpectedly jumped, coming in above the four-week average for US jobless benefits seekers.

Daily digest market movers: Canadian Dollar finds some room to recover against Greenback

  • The Canadian Manufacturing PMI printed at 48.3 for January, stepping over the previous month’s 45.4, a sharp recovery from December’s three-and-a-half-year low.
  • US Initial Jobless Claims for the week ended January 26 printed at 224K versus the forecasted 212K. Last week’s jobless tickets came in at 215K.
  • US Initial Jobless Claims posted their highest print since November 10, accelerating above the four-week average of 207.75K.
  • The US ISM Manufacturing PMI recovered to 49.1 in January compared to the forecasted tick down to 47.0 from December’s 47.1, its highest reading in 16 months.
  • US ISM Manufacturing Prices Paid also rose to a 9-month high of 52.9 compared to the forecasted jump to 46.9 from December’s 45.2 as producer-level inflation bites.
  • The trading week will close out with another high-impact US Nonfarm Payrolls (NFP) print on Friday.
  • US NFP job additions are forecast to tick down to 180K in January compared to December’s 216K.
  • Market NFP forecasts have undershot the actual NFP print in all but four of the last 21 consecutive releases.
  • Crude Oil markets have flattened after a panicked rise that saw West Texas Intermediate (WTI) US Crude Oil climb over $79 per barrel last week.
  • Crude Oil bids have receded, allowing WTI to settle just above $76.00.
  • NFP Preview: Forecasts from 10 major banks

Canadian Dollar price today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the US Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.64% -0.53% -0.47% -0.19% -0.47% -0.45% -0.53%
EUR 0.64%   0.10% 0.15% 0.48% 0.20% 0.20% 0.12%
GBP 0.55% -0.10%   0.05% 0.36% 0.10% 0.08% -0.01%
CAD 0.46% -0.14% -0.05%   0.31% 0.05% 0.04% -0.02%
AUD 0.18% -0.48% -0.38% -0.33%   -0.28% -0.28% -0.35%
JPY 0.46% -0.19% -0.11% -0.08% 0.25%   -0.03% -0.09%
NZD 0.45% -0.15% -0.07% -0.02% 0.29% -0.04%   -0.09%
CHF 0.53% -0.12% 0.01% 0.08% 0.37% 0.06% 0.08%  

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: Canadian Dollar recovers against US Dollar, mixed in Europe and Oceania

The Canadian Dollar (CAD) has rebounded around half a percent against the US Dollar and has trimmed early Thursday losses against most of its major currency peers, climbing around four-tenths of a percent against the Australian Dollar (AUD) and recovered close to flat against the Japanese Yen (JPY). The Canadian Dollar still remains down around a sixth of a percent against the Euro (EUR), the broader FX market’s single best-performing currency on Thursday.

USD/CAD dipped back below the 1.3400 handle once again for the fourth time in two days as the Dollar-Loonie pair roils on market sentiment. The pair recovered to 1.3460 early Thursday after Wednesday’s Fed-fueled churn, reaching a near-term low of 1.3360.

USD/CAD is heading back into downside territory below 1.3380, with Thursday’s peak etching in a rejection from the 200-hour Simple Moving Average (SMA). Thursday’s nearish push drives the USD/CAD toward the low end of near-term congestion that has plagued the pair on daily candlesticks. Intraday action is set to remain capped by the 200-day SMA just below the 1.3500 handle.

USD/CAD hourly chart

USD/CAD daily chart

Economic Indicator

United States Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews ​and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Read more.

Next release: 02/02/2024 13:30:00 GMT

Frequency: Monthly

Source: US Bureau of Labor Statistics

Why it matters to traders

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

Interest rates FAQs

What are interest rates?

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

How do interest rates impact currencies?

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

How do interest rates influence the price of Gold?

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

What is the Fed Funds rate?

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

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