As tension mounts in Northern Iraq trader risk sentiment has all but faded. With that in mind many traders are opting to invest in safe-haven currencies, and the US Dollar has profited. The Canadian Dollar, which is notoriously sensitive to commodity changes, has lost ground against the majority of its most traded currency peers.
The US Dollar to Canadian Dollar exchange rate is currently trending in the region of 1.1090.
US Dollar investors have been put through their paces over the past few days as the American currency has been subject to volatile changes. Having begun the week in a strong position the ‘Buck’ (USD) weakened after domestic data showed a decline in existing home sales. Further ‘Greenback’ (USD) losses on Monday were as a result of a dovish speech from New Your Federal Reserve President William Dudley. Dudley said; ‘I would love to be able to raise interest rates during in my tenure but I’m not going to do something to interest rates just for the sake of doing something to interest rates, but it would be nice to see some sufficient progress in terms of the economy, the labour market and inflation to be able to raise interest rates in 2015’.
The US Dollar bounced back on Tuesday after factory output printed broadly in line with the market consensus. Chris Williamson, Chief Economist at Markit said; ‘The flash PMI signalled another month of impressive growth of the US manufacturing economy. The third quarter as a whole has seen the strongest expansion since the sector began to recover from the financial crisis’.
Tuesday’s Canadian data showed retail sales to have contracted by -0.1%. The news sent the ‘Loonie’ (CAD) on a bearish course against many of its most traded currency peers. Mounting geopolitical tensions and a strengthening US Dollar has only aided the Canadian Dollar downtrend.
The US Dollar to Canadian Dollar exchange rate has hit a low today of 1.1090.
Wednesday has seen the US Dollar continue to strengthen across the board. This is in spite of several factors which would have, ordinarily, sent the ‘Greenback’ back down the Earth. Mounting geopolitical issues concerning Syria and Israel has caused trader risk sentiment to wane significantly; aiding the US Dollars uptrend on its safe-haven qualities.
Early on Wednesday morning (GMT) Kansas City Federal Reserve President Esther George made a dovish speech in which she said she is in no rush to hike rates; ‘My objective is not to raise rates quickly – I do not want to derail this recovery,’ George said at a dinner. ‘I think it is critical that we begin now to normalize those interest rates, to begin to allow the economy and the markets to allocate credit, to price risks the way they are intended to do’.
US economic data on Wednesday has printed relatively negatively. The MBA Mortgage Applications contracted by -4.1% despite having registered a 7.9% growth previously.
A complete absence of Canadian economic data on Wednesday has seen the Canadian Dollar continue to fall against its competitors. It is likely to remain on the same course for the remainder of the day.
Forecast for the US Dollar to Canadian Dollar Exchange Rate
There is nothing in terms of Canadian economic data for the remainder of the week. Therefore it is likely that the ‘Loonie’ will continue to trend low unless there are any significant geopolitical developments.
Thursday will be a bumper day in terms of American domestic data publications. Durable Goods Orders will be of high significance in terms of provoking volatility. After a surge in demand for aircraft July’s durable goods data was unusually high. Augusts’ orders are expected to contract by -18.0%. Thursday’s US labour market data will also be of interest to those invested in the ‘Greenback’. Positive labour market data will put pressure on the Fed to normalise interest rates.
Friday’s US data has potential to ignite US Dollar movement. Second Quarter Annualised Gross Domestic Product is forecast to increase from 4.2% to 4.6%. The University of Michigan Confidence Report will also be of interest and is expected to increase from 84.6 to 84.8.
Given the lack of Canadian data and the plethora of US data it is highly likely that the US Dollar to Canadian Dollar exchange rate will continue to rise if the US data meets with the market consensuses.
The US Dollar to Canadian Dollar exchange rate has reached a high today of 1.1090.
UPDATE
The US Dollar to Canadian Dollar exchange rate consolidated gains after an official from the Bank of Canada delivered some provocative comments regarding the strength of the ‘Loonie’.
BOC Deputy Governor Timothy Lane indicated that the Canadian Dollar is likely to post further losses once the Federal Reserve brings its fiscal stimulus to an end.
The USD/CAD exchange rate could rally further if today’s US reports (including the nation’s services/composite PMI) impress.
