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Australian Dollar to Canadian Dollar (AUD/CAD) Exchange Rate Remains Volatile

The Australian Dollar to Canadian Dollar (AUD/CAD) exchange rate has been experiencing a tug-of-war situation around the parity mark over the past week. The ‘Aussie’ (AUD) and ‘Loonie’ (CAD) have been undergoing a gladiator-like tussle to become the stronger currency, as strong economic forces weigh down on both currencies.

The AUD/CAD exchange rate pushed up gradually for the first few weeks of 2015; rising from below the 0.95 mark in early January to hit a high of 1.0036 last week, following the Bank of Canada’s surprise announcement to cut interest rates by 25 basis point from 1.00% to 0.75%. It was the first movement to Canada’s interest rate since September 2010.

Stephen Poloz, Governor of the Bank of Canada, emphasised the fall in crude oil pricing as being of great concern and ‘unambiguously negative for the Canadian economy’. The interest rate cut allowed the AUD/CAD exchange rate to continue trending north, pushing above the parity mark before sliding back under during the Australian trading session last Friday.

Friday evening, the Canadian economy reported on inflation in the form of the Consumer Price Index (CPI). CPI was sitting at 2.0% prior to the announcement and the result was a decline to 1.5%. Retails Sales were also expected to decline, however slight growth was printed for this economic indicator. This caused the AUD/CAD exchange rate to push back dow prior to the weekend before rebounding back up overnight yesterday.

Australian Dollar to Canadian Dollar Forecast (AUD/CAD) Exchange Rate Forecast

The outlook for the AUD/CAD exchange rate does not appear strong, despite a big rally being experienced by the ‘Aussie’ (AUD) against the ‘Loonie’ (CAD) so far this year.

Many economists’ now forecast the Reserve Bank of Australia (RBA) to follow suit and cut interest rates. If this does occur, we can expect the AUD/CAD exchange rate to dwindle following the announcement. The first RBA Rate Decision of 2015 will occur next Tuesday on the 3rd February.

A clearer view of the sort-term direction of the AUD/CAD exchange rate will be made apparent with the release of the Australian Consumer Price Index (CPI) tomorrow. The annualised Australian CPI figure is currently sitting at 2.3%, within the RBA’s target range of 2-3%. Tomorrow’s CPI release will provide an indication of whether the global inflationary weakness is impacting Australia. The Australian CPI figures will be released tomorrow at 10:30am AEST.