Home Daily Commentaries Canadian dollar remains flat ahead of economic data

Canadian dollar remains flat ahead of economic data

Daily Currency Update

The US dollar continued its winning streak this morning, trading around 1.3600 during the early trading hours in the European session. The retreating US Treasury yields are pushing the USD/CAD pair downward. Investors await upcoming data releases from the US and Canada, seeking a fresh perspective on the economic outlook of both countries. Oil prices continue to face pressure above $80.00 as the Chinese economy is going through turbulent times due to rising deflation risks and weak domestic demand. On the economic data front, Q2 Gross Domestic Product (GDP) data released this morning, showed the Canadian economy grew at a slower pace of 0.3% versus the Q1 growth rate of 0.8%, which was in line with expectations.

Key Movers

It’s a busy day for economic data, particularly in the US, with the release of Jolts Job Openings, Housing Price Index, and Consumer Confidence reports. All are set to come out later today. A combination of factors has put gentle pressure on the US dollar, which in turn, acted as a tailwind for the currency. China’s new measures on stock trading and exchanges, along with a further decline in the US Treasury bond yields, keep the safe-haven dollar on the defensive below the three-month peak touched last Friday. Federal Reserve Chair Jerome Powell noted that the Fed was prepared to raise rates further if appropriate, helping to keep the dollar on the front foot. He continued that persistent above-trend growth would warrant further tightening. Trends in the US labor market are important for underlying inflation and in turn the outlook for US monetary policy and the USD.

The EUR has dipped almost 5% since mid-July, after experiencing two months of weak Purchasing Managers' Index (PMI) readings, which is an index of economic trends in the manufacturing and services sector. European Central Bank (ECB) President Christine Lagarde vowed to take control of Eurozone inflation, when speaking at the Jackson Hole summit last week and is willing to set interest rates as high as needed and to leave them there until inflation is back to its 2% goal.

World stocks rallied yesterday, with sentiment supported by China's efforts to shore up its markets and lift confidence toward the world's second-largest economy. The global risk sentiment supports optimism led by new measures rolled out in China over the weekend to draw investors back into its battered stock markets. China's finance ministry halved the stamp duty levied on stock trading and exchanges lowered their margin requirements, boosting investors' confidence.

The AUD has ticked up slightly over the past 24 hours, with positive risk sentiment by Chinese policymakers to bolster investor confidence and stabilize the CNY, prompting stronger Australian retail sales, and generating some support.

Expected Ranges

  • EUR/CAD: 1.0788 - 1.0837 ▼
  • GBP/CAD: 1.2568 - 1.2632 ▼
  • AUD/CAD: 0.6404 - 0.6454 ▼
  • USD/CAD: 1.3577 - 1.3634 ▲