- The USD/CAD pair is rising sharply to approach 1.4430, with investors remaining cautious as Trump is set to return to the White House on Monday.
- Canada’s economic outlook has weakened on the assumption that Trump will raise tariffs by 25%.
- Weak December core CPI data forced traders to raise dovish Fed bets.
The USD/CAD pair rose to around 1.4430 in the North American session on Friday. The Canadian pair is strengthening as the Canadian dollar (CAD) performs weakly, with investors turning cautious as US President-elect Donald Trump is scheduled to be sworn in on Monday.
Canadian dollar price today
The table below shows the percentage change in the Canadian Dollar (CAD) against the major currencies listed today. The Canadian dollar was the strongest against the New Zealand dollar.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.06% | 0.40% | 0.25% | 0.22% | 0.43% | 0.43% | 0.16% | |
| euro | -0.06% | 0.33% | 0.19% | 0.15% | 0.36% | 0.37% | 0.09% | |
| GBP | -0.40% | -0.33% | -0.15% | -0.18% | 0.03% | 0.03% | -0.24% | |
| JPY | -0.25% | -0.19% | 0.15% | -0.03% | 0.17% | 0.18% | -0.10% | |
| Canadian | -0.22% | -0.15% | 0.18% | 0.03% | 0.20% | 0.22% | -0.06% | |
| Australian dollar | -0.43% | -0.36% | -0.03% | -0.17% | -0.20% | 0.00% | -0.27% | |
| New Zealand dollar | -0.43% | -0.37% | -0.03% | -0.18% | -0.22% | -0.01% | -0.28% | |
| Swiss franc | -0.16% | -0.09% | 0.24% | 0.10% | 0.06% | 0.27% | 0.28% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the Canadian dollar from the left column and move along the horizontal line to the US dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Investors expect that Trump’s first task will be to issue a new tariff plan, a scenario that could lead to a global trade war. The Canadian economy is expected to face a 2% increase in tariffs on its exports to the United States, as Trump previously stated.
Market participants expect that the large tariffs imposed by the United States on Canada may dampen their economic outlook. “If Canada is hit with significant tariffs and does not respond, the deflationary effects will likely lead to further easing by the Bank of Canada (BoC),” said Derek Holt, economists at Scotiabank.
The Bank of Canada was one of the leading central banks to ease policy restrictions aggressively. According to a Reuters poll conducted January 10-16, the Bank of Canada will almost certainly cut interest rates by 25 basis points to 3%.
Meanwhile, the US Dollar (USD) is moving higher as investors digest an acceleration in traders’ bets that support more than one rate cut by the Federal Reserve (Fed). The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, rose to nearly 109.15.
The Fed’s dovish bets rose after the release of the US December CPI report, which showed that annual core inflation surprisingly slowed.
Frequently asked questions about the Canadian dollar
The main factors that move the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of oil, Canada’s largest export, the health of its economy, inflation and the trade balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are moving into riskier assets (risk on) or looking for safe havens (risk off) – with risk being positive for the Canadian dollar. As its largest trading partner, the health of the US economy is also a major factor affecting the Canadian dollar.
The Bank of Canada (BoC) has significant influence on the Canadian dollar by setting the level of interest rates that banks can lend to each other. This affects the level of interest rates for everyone. The Bank of Canada’s main goal is to keep inflation at 1-3% by adjusting interest rates up or down. Relatively high interest rates tend to be positive for the Canadian dollar. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD negative and the latter positive.
The price of oil is a major factor affecting the value of the Canadian dollar. Petroleum is Canada’s largest export, so oil prices tend to have an immediate impact on the value of the Canadian dollar. In general, if the price of oil rises, the Canadian dollar also rises, as overall demand for the currency increases. The opposite is the case if the price of oil falls. Higher oil prices also tend to increase the likelihood of a positive trade balance, which also supports the Canadian dollar.
While inflation has always been thought to be a negative factor for a currency because it reduces the value of money, the opposite is the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to prompt central banks to raise interest rates, attracting more capital flows from global investors looking for a profitable place to keep their money. This increases the demand for the local currency, which in Canada’s case is the Canadian dollar.
Macroeconomic data releases measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing PMIs, services, employment and consumer surveys can all influence the direction of the Canadian dollar. A strong economy is good for the Canadian dollar. Not only does it attract more foreign investment, it may encourage the Bank of Canada to raise interest rates, leading to a stronger currency. If economic data is weak, the Canadian dollar will likely fall.
