Canadian Dollar Weakens Amid Renewed Greenback Strength

Canadian Dollar Slides as US Dollar Gains Momentum

The Canadian Dollar further weakened against the US Dollar on Thursday, touching new 13-week lows as a lack of significant Canadian economic data left the US Dollar in control. The strength of the US Dollar is pushing the CAD down. Several factors influences the exchange rate, including oil prices, the monetary policy of the Bank of Canada, and the economic performance of the US.

The Canadian Dollar (CAD) experienced another downturn against the US Dollar (USD), reaching new 13-week lows and driving the USD/CAD pair above 1.3900. The Loonie is in a steady technical decline as traders await catalysts to shift their perspectives. Central banking decisions, particularly by the Federal Reserve (Fed), and the potential for interest rate cuts in September, are key factors being monitored. The Fed Bank of Kansas City is hosting its annual economic symposium in Jackson Hole, with markets closely anticipating Fed Chair Jerome Powell’s remarks on Friday.

Daily Market Movers: Canadian Dollar Continues to Lose Ground to US Dollar

The Canadian Dollar declined by approximately one-quarter of one percent against the US Dollar on Thursday. The CAD has weakened against the Greenback for three consecutive sessions, experiencing a consistent bearish trend.

Mixed US PMI data initially boosted the US Dollar on Thursday, as businesses passed tariff costs onto consumers amid rising inventory levels. However, recent US inflation data has prompted Fed officials to adopt a more hawkish stance on interest rates, potentially impacting the likelihood of a rate cut in September.

Canadian Dollar Price Forecast

The persistent weakness weighing on the Canadian Dollar is supporting the US Dollar, driving the USD/CAD pair to three-month highs. The pair has reached the 200-day Exponential Moving Average (EMA) near 1.3880, suggesting a potential for further bullish movement. Should Canadian Dollar bulls regain momentum, the pair could reverse course and decline towards the 50-day EMA near 1.3770.

Key Drivers of the Canadian Dollar

Key factors influencing the Canadian Dollar include interest rates set by the Bank of Canada, oil prices (Canada’s largest export), the health of the Canadian economy, inflation, and the trade balance. Market sentiment and the strength of the US economy also play significant roles.

Impact of Bank of Canada Decisions

The Bank of Canada (BoC) significantly influences the Canadian Dollar by setting interest rates. The BoC aims to maintain inflation between 1-3% by adjusting interest rates. Higher interest rates generally benefit the CAD. The Bank can also use quantitative easing or tightening to influence credit conditions.

Impact of Oil Prices

Oil prices are a crucial factor affecting the Canadian Dollar’s value. As Canada's largest export, oil price fluctuations directly impact the CAD. Higher oil prices usually strengthen the CAD due to increased demand, while lower prices weaken it.

Impact of Inflation Data

Higher inflation often leads central banks to raise interest rates, attracting capital inflows from global investors. This increases demand for the local currency, in this case, the Canadian Dollar.

Impact of Economic Data

Macroeconomic data releases, such as GDP, Manufacturing and Services PMIs, employment figures, and consumer sentiment surveys, can influence the Canadian Dollar. A strong economy is generally favorable for the Canadian Dollar.