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Canadian Dollar Rebounds From Five-Month Low Amid Crude Oil Rally

November 21, 2018 at 15:11 by Andrew Moran

Sir Robert Borden on 100-dollar billThe Canadian dollar is rebounding from its lowest level in five months on Wednesday as crude oil prices are rallying about 2%. The loonie’s gains were capped by recent dovish comments by a senior Bank of Canada (BOC) official who warned about consumer finances amid rising interest rates.

While investors wait for the US Energy Information Administration (EIA)’s weekly data and comb through industry news, crude is surging midweek. Oil is one of Canada’s biggest exports, and the energy commodity has had a greater impact on the currency in recent months since Ottawa agreed to a new trade agreement with the US and Mexico.

January West Texas Intermediate (WTI) crude futures rose $1.19, or 2.23%, to $54.62 per barrel at 13:45 GMT on Wednesday on the New York Mercantile Exchange. Because of the market rout this month, oil has wiped all of its 2018 gains, bringing its year-to-date losses to 5.7%.

Speaking at McGill University on Tuesday, BOC Senior Deputy Governor Carolyn Wilkins sounded the alarm that rate hikes are affecting the personal finances of millions of Canadians. For every $1 of disposable income, consumers owe more than $1.73, and total obligations have already exceeded $1 trillion.

The objectives that we set and how we go about achieving them have real implications for people in their everyday lives. This could not be more obvious than it is today, as interest rates rise to more normal levels. This is resulting in difficult adjustments in the finances of many. At the same time, the Bank’s actions are supporting a stable economic environment for even more households.

Although the loonie plunged to its worst level since the end of June, Wall Street appears to be bullish on the currency. Goldman Sachs and Julius Baer say with the central bank raising rates and the Canadian economy at “similar stages of the economic cycle,” the loonie is a great investment strategy heading into 2019.

Without any Canadian data on the docket, traders looked to the US for numbers. Building Permits is projected to rise to 1.26 million and Housing Permits are forecast to improve to 1.23 million.

The USD/CAD currency pair fell 0.17% to 1.3284, from an opening of 1.3308, at 13:54 GMT on Wednesday. The EUR/CAD advanced 0.11% to 1.5145, from an opening of 1.5130.

If you have any questions, comments, or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

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