Canadian Dollar sees whipsaw action for Tuesday on mixed US Retail Sales, Canadian CPI figures

By News Room Last updated Oct 17, 2023

Canadian Dollar slumped 0.65% from the day’s open after US Retail Sales beat the market.
Canada CPI inflation missed expectations, but Loonie traders are shrugging off the miss as the US Dollar recedes across the board.
Crude Oil spot prices are dipping for Tuesday, hobbling excess gains for the CAD.

The Canadian Dollar (CAD) went V-shaped after markets saw a large run-up in the US Dollar (USD) ahead of Tuesday’s US Retail Sales reading, and a beat on the expected figure is seeing broad-market sentiment improving, sending the USD lower across the board, with the CAD shrugging off a miss for Canadian Consumer Price Index (CPI) figures.

Canada CPI inflation came in below expectations, but the Loonie is getting bolstered back into the day’s opening prices as investors pull out of the Greenback in a risk appetite bid. Crude Oil prices are also on the low side for Tuesday, pulling support out from beneath the CAD and constraining additional gains for the day.

Daily Digest Market Movers: Canadian Dollar plunges then recovers as markets corkscrew

The USD/CAD spiked past 1.3700 in the runup to the US Retail Sales/Canada CPI data double-header.
A solid beat for US Retail Sales on Tuesday, with the headline figure for September coming in at 0.7%, well above the forecast 0.3% and the previous figure getting revised from 0.6% to 0.8%.
Canadian CPI inflation missed the mark, printing at 3.8% for the annualized period into September, under the 4% forecast-steady reading.
A solid beat for US Retail Sales sent risk-hungry investors piling out of the USD and into riskier assets, sending the Greenback down across the board.
USD/CAD recovered the day’s bids back towards the 1.3600 handle.
A miss for Canadian CPI inflation is capping off Loonie gains against the Greenback.
Crude Oil prices are also seeing downside pressure for Tuesday, limiting CAD upside momentum.
CAD traders will be looking ahead to Friday’s Canadian Retail Sales to make up ground.

Technical Analysis: Canadian Dollar rebounds from pre-US Retail Sales runup, USD/CAD looking to reclaim 1.3660

The USD/CAD spiked to a seven-month high in the early Tuesday session, before dropping back into Monday’s trading range after markets turned broadly risk-on, taking the pair back towards 1.3620, and intraday action is now tussling with the 50-hour Simple Moving Average (SMA) near 1.3635. As Tuesday trading develops, the Canadian Dollar is seeing a refreshed push back into familiar levels near 1.3660.

Tuesday’s spike-and-tumble for the USD/CAD leaves the pair constrained in near-term levels on the daily candlesticks, with technical support coming from the 50-day SMA near 1.3575, while last week’s swing high into the 1.3700 handle represents the figure to beat for USD/CAD bidders.

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 Australian Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.16%	0.26%	0.28%	-0.34%	0.16%	0.15%	0.03%
EUR	0.15%		0.43%	0.43%	-0.18%	0.31%	0.32%	0.19%
GBP	-0.27%	-0.44%		-0.01%	-0.61%	-0.12%	-0.12%	-0.24%
CAD	-0.28%	-0.43%	-0.01%		-0.61%	-0.12%	-0.12%	-0.25%
AUD	0.33%	0.16%	0.59%	0.60%		0.48%	0.49%	0.35%
JPY	-0.16%	-0.31%	0.15%	0.12%	-0.47%		0.00%	-0.13%
NZD	-0.14%	-0.31%	0.13%	0.12%	-0.49%	0.01%		-0.14%
CHF	-0.04%	-0.20%	0.24%	0.24%	-0.38%	0.12%	0.13%

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).

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

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