On Friday, USD/CAD slipped in line with the broad weakness of the US Dollar, closing the week below 1.3280 after rallying to over 1.3385 earlier in the day. However, this morning, the US dollar is recovering most of its losses due to negative economic news from China, which once again highlights the potential for weaker global demand. A decline in global demand would undoubtedly have a negative impact on Canada’s export-dependent economy.
The Canadian dollar had strengthened sharply against the US Dollar in the month of June, going from over 1.36 to about 1.31 (USD/CAD). However, so far in July, the Canadian dollar has given up about half of those gains.
There seems to be no letup in the steady stream of positive economic news rolling in this week. Higher Japanese and Australian retail sales, better-than-expected US weekly unemployment numbers, and a significant upward revision in USD Q1 GDP from 1.4% to 2% are all fanning the flames of the ‘higher for longer’ school of thought when it comes to interest rates and central banks’ strategy to fight inflation.
The Canadian dollar continued its trend of setting overnight highs against the US dollar reaching 1.3177 last night. The Canadian dollar gained strength against the US dollar due to the broad weakness of the USD. Over the weekend and into Monday, the US dollar had initially strengthened as a result of the chaotic and short-lived armed rebellion in Russia, but it relinquished most of its gains today.
Last week, following ten consecutive increases, the Federal Reserve decided to pause its campaign of interest rate hikes. The Fed also went to great lengths to reaffirm their commitment to bringing inflation below the 2 percent target. The problem was that the markets didn’t buy it.
The Canadian dollar is currently trading at 1.3365 (USD/CAD) or 0.74824 (CAD/USD) after reaching its strongest intraday level since May 8 at 1.3322 against the US Dollar. The Canadian dollar benefitted from a trifecta of positive news on multiple fronts today.
Heading into the Memorial Day long weekend down south, there is tempered optimism that a potential debt ceiling deal is starting to take shape, most likely because politicians prefer not to work on long weekends.
The Canadian dollar hit its weakest level against the US dollar since April 28th, reaching 1.3644 on Thursday. A drop in oil prices and a lack of progress in the US debt ceiling negotiations contributed to the weakening of the Canadian dollar against the US dollar.
The Canadian dollar is approaching a three-week low against the US dollar today as negative market sentiment propels the US dollar higher. The combination of Chinese equity markets moving into negative territory for the year and the rapidly approaching US debt ceiling deadline has led investors to sell riskier assets such as the Canadian dollar and buy safe haven assets such as the US dollar.
Overnight, the Canadian dollar weakened by about ¼ of a penny against the US dollar. However, this morning, both the CAD and USD are underperforming against major global currencies. The USD/CAD pairing has mostly experienced range-bound trading over the last two days, with the exchange rate bouncing between defined levels. All the action occurred earlier this week following the release of higher-than-expected April inflation numbers in Canada. Initially, this news provided a temporary boost to the Canadian dollar, leading to a decline in USD/CAD from a high of 1.3567 to around 1.3400 on Wednesday. However, much of this decline was quickly reversed.