The US Dollar to Canadian Dollar gained support to rise to 1.2500 levels. Crude oil prices are increasing, causing a spurt in the USD/CAD currency pair.
Canadian Dollar Rises to 1.25 Levels
The commodity-based US Dollar to Canadian Dollar currency change found support at the 1.2420 levels. It has gained support at this level for about four weeks. Expectations of an increase in oil price rise have lent support to the Loonie. The decline in US crude oil inventories has pulled up crude oil prices. Crude prices recouped some losses on concerns of the Delta virus variant.
The US Dollar to Canadian Dollar rises once again to the 1.25 levels. Further, the 200-day SMA is around the 1.2590 levels.
The Canadian to US Dollar conversion in the forex market is at 0.7963. It went to a high of 0.8109 over the last 30 days. Moreover, the Canadian to American Dollar has a volatility of 0.42%.
On the downside, the 1.2400 area has been supportive of the US Dollar to CAD currency change. But a convincing break below this level will bring in bearish dominance. The Delta variant coronavirus is causing economic damage, raising fears of another lockdown, which keeps investors wary of the foreign currency exchange.
The WTI slipped below the $71.00 levels on August 2 but recouped to move to 71.60 levels the very next day.
Inflation Within 1% to 3% Range
Canada saw a jump in inflation figures. Crude prices declined in early 2020, but of late, crude prices are increasing, which is a cause for rising inflation. The US Dollar to CAD in the foreign currency exchange weakened on inflation worries. It keeps the USD/CAD currency pair range-bound in the forex markets.
The housing bubble is another reason for inflation, say experts. Low interest rates bring in new home buyers who want a secure home. Home prices slumped during the pandemic, which started in March 2020. Supply bottlenecks add pressure to price increase and cause inflation, say Bank of Canada officials.
Bank of Canada Governor Tiff Macklem says that there is a continual need to monitor and address inflation. He says that the central bank has the mandate and tools to control inflation if it gets out of hand. The factors that push up inflation are transitory, says Macklem.
Bank of Canada states that inflation is within the 1% to 3% range. If inflation moves above the targeted 2% level, the central bank may hike interest rates say, analysts. Experts predict that inflation may come down by the end of 2022. Rising bills are making it hard for people to manage their lives. Investors are waiting on the side lines in the foreign exchange market, seeking direction from the Canadian to American Dollar.
According to Statistics Canada, GDP month-on-month is still under contraction but has improved from -0.5% to -0.3% in May, to around 1.97 trillion Canadian Dollars. The key drivers that affect economic growth are manufacturing, mining, and real estate. Analysts watch these key elements in the foreign exchange market.
The Covid-19 pandemic brought down economic growth in March 2020. However, the economy saw a mild rebound in the second half of 2020. In March 2020, real GDP in Canada fell to 11.3% q/q. But it recouped its losses by the close of 2020.
The GDP data released by Statistics Canada is a broad measure of economic activity in Canada. Most of Canada's trade comes from the US, the UK, and China. As borders are reopening for trade between countries, the foreign exchange market may see a recovery. Household spending shows recovery as employment improves and businesses recover. Exports are higher as demand for products increases.
The Covid-19 affected public health measures in May, especially in accommodation and food services. These sectors have a higher number of job openings in May. In particular, Quebec has the highest job vacancy rates, followed by Newfoundland, BC, and Labrador.
International students who study in Canada have not returned, which is another reason for increasing job openings. The opening of the Canadian border to immigrants may help to improve matters in the job sector. The virus scare is keeping students away.
Covid Scare Continues
The global recovery is still fragile and economic activities are just turning positive. But the Delta variant virus is affecting most countries. The supply chain is showing signs of recovery, and officials fear that another wave of the virus may impact economic conditions and the forex markets again.
The third wave of the pandemic in Canada is slowly receding. The vaccination program shows improvement, which has brought in optimism.
US Economy Makes Progress
Economic recovery in the US shows improvement, but the Fed will not bring any significant change in monetary policy say, experts. The next Fed meeting, scheduled for the last week of September, may provide light on the Fed's intentions. Fed's Powell says that the US job market has to improve before lowering the bond purchase program.
The Canadian to US Dollar conversion shows that 100 US Dollars are equal to 124 Canadian Dollars.