USD/CAD jumps to nearly 1.3740 after strong US retail sales and lower unemployment figures
- USD/CAD rises to near 1.3740 as the US dollar recovers after positive US data.
- Retail sales in the US rose sharply by 1 percent and the number of initial jobless claims was lower than expected.
- A significant recovery in oil prices continues to boost the Canadian dollar.
The USD/CAD pair is witnessing a vertical upside move to nearly 1.3740 in Thursday’s New York session as the U.S. dollar (USD) is rallying sharply. The U.S. dollar is recovering following the release of stronger-than-expected U.S. retail sales for July and lower initial jobless claims for the week ended August 9.
The US dollar index (DXY), which tracks the greenback’s value against six other major currencies, jumps above 103.00. The US retail sales report showed that sales at retail stores rose at a brisk pace of 1%, against estimates of 0.3%, on strong demand for autos. In June, retail sales declined 0.2%, a downward revision from a flat reading.
US dollar price today
The table below shows the percentage change in the US dollar (USD) against major listed currencies today. The US dollar was strongest against the Japanese yen.
| USD | EUR | GBP | EUR | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.44% | 0.03% | 1.21% | -0.01% | -0.20% | 0.28% | 0.80% | |
| EUR | -0.44% | -0.41% | 0.74% | -0.44% | -0.72% | -0.32% | 0.35% | |
| GBP | -0.03% | 0.41% | 1.17% | -0.03% | -0.31% | 0.10% | 0.85% | |
| EUR | -1.21% | -0.74% | -1.17% | -1.21% | -1.41% | -1.05% | -0.32% | |
| CAD | 0.00% | 0.44% | 0.03% | 1.21% | -0.20% | 0.13% | 0.88% | |
| AUD | 0.20% | 0.72% | 0.31% | 1.41% | 0.20% | 0.39% | 1.15% | |
| NZD | -0.28% | 0.32% | -0.10% | 1.05% | -0.13% | -0.39% | 0.75% | |
| CHF | -0.80% | -0.35% | -0.85% | 0.32% | -0.88% | -1.15% | -0.75% |
The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the US dollar from the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box corresponds to USD (base)/JPY (quote).
Retail sales are an important indicator of household spending, which ultimately drives consumer inflation. Higher values and volumes of retail sales revenue indicate robust spending by individuals. Positive retail sales have dampened market speculation that the Federal Reserve (Fed) may cut interest rates by 50 basis points in September. However, firm market expectations that the Fed will move toward policy normalization in September remain.
At the same time, the number of first-time jobless claimants was 227,000, below estimates of 235,000 and the previous release of 234,000, which was revised upwards from 233,000.
As for the Canadian dollar (CAD), rising oil prices continue to act as a buffer for the Lonnie. Oil prices have rebounded sharply after a two-day correction on expectations that Fed rate cuts will boost fuel consumption. It is worth noting that Canada is the leading oil exporter to the United States, and higher oil prices lead to significant foreign inflows into the US.
Frequently asked questions about the Canadian dollar
The main factors that affect the Canadian dollar (CAD) are the Bank of Canada (BoC) interest rate level, the price of oil, Canada’s largest export commodity, the health of its economy, inflation and the trade balance, which is the difference between the value of Canadian exports and imports. Other factors include market sentiment – whether investors are looking to take on riskier assets (risk-taking) or seek safe havens (risk-averse) – with risk-taking being positive for the CAD. As the largest trading partner, the health of the US economy is also a major factor that affects the Canadian dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian dollar by setting the level of interest rates at which banks can lend money to each other. This affects the level of interest rates for everyone. The BoC’s main goal is to keep inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to have a positive effect on the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former negatively affecting the CAD and the latter positively affecting the CAD.
The price of oil is a major factor that affects the value of the Canadian dollar. Petroleum is Canada’s largest export commodity, so the price of oil usually has a direct impact on the value of the CAD. When the price of oil rises, the CAD generally rises as well, as overall demand for the currency increases. The opposite is true when the price of oil falls. Higher oil prices also tend to lead to a greater likelihood of a positive trade balance, which also supports the CAD.
While inflation has traditionally always been seen as a negative factor for a currency as it reduces the value of money, in modern times with the loosening of cross-border capital controls, the opposite is actually true. Higher inflation tends to cause central banks to raise interest rates, which leads to more capital inflows from global investors looking for a lucrative investment opportunity for their money. This increases the demand for the local currency, in the case of Canada, that is the Canadian dollar.
The release of macroeconomic data is an indicator of the health of the economy and can impact the Canadian dollar. Indicators such as GDP, manufacturing and services purchasing managers’ indices, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian dollar. Not only does it attract more foreign investment, but it can also encourage the Bank of Canada to raise interest rates, leading to a stronger currency. However, if economic data is weak, the CAD is likely to fall.
