The Canadian dollar is currently experiencing mixed influences, with support stemming from firm oil prices and a steady domestic monetary policy outlook. However, this upward momentum is being countered by renewed trade and geopolitical uncertainty, specifically threats of tariffs from the US. Inflation dynamics argue against near-term easing, further contributing to the complex environment for the Canadian dollar.
- The Canadian dollar steadied near 1.37 per US dollar.
- Firmer oil prices and a steady domestic policy outlook provide support.
- Crude prices are rising due to slowing Russian fuel oil exports, supply disruptions in the US, and reduced Venezuelan shipments to China.
- Canada’s terms of trade improve as the largest crude supplier to the US.
- Headline CPI is at 2.4%, above the Bank of Canada’s 2% target.
- Expectations are that the policy rate will remain at 2.25% for longer.
- Renewed trade risk, with potential 100% tariffs from the US if Canada pursues a trade deal with China, caps gains.
- USD/CAD recovers from a four-week low, trading around the 1.3735-1.3740 region.
The Canadian dollar’s value is influenced by a combination of factors. While positive economic indicators like rising oil prices and stable monetary policy provide upward pressure, external forces, especially trade tensions, act as a counterweight, limiting potential gains. This creates a situation where the asset’s performance is dependent on the interplay of internal strengths and external risks.