The Canadian dollar (CAD), commonly known as the "loonie," has been under pressure recently, with the USDCAD exchanging above 1.38. This upward trend is attributed to a cautious stance from the Bank of Canada (BoC) combined with an aggressive Federal Reserve, which has bolstered the position of the US dollar.
As notable Canadian economic data is scarce this week, analysts anticipate that the CAD may revert to align with oil price movements. In April, oil prices saw a recovery, rising by 1.8% to $62.45 per barrel, which provides support for the CAD given Canada's status as a major oil exporter. Recent shifts in oil prices are therefore expected to play a crucial role in the loonie's performance.
However, the outlook for the CAD has been complicated by ongoing political and trade tensions. The recent leadership change with Mark Carney stepping in as Prime Minister and the imposition of tariffs on Canadian goods by the U.S. could weigh heavily on investor sentiment. Additionally, the BoC's decision to maintain its interest rate at 2.75%, rather than pursue cuts, has had mixed effects on the currency’s stability.
Current price data reflects the CAD's performance: CAD to USD is at 0.7246, just below its three-month average, while CAD to EUR stands at 0.6250, 1.2% below the recent average. Conversely, CAD to GBP has edged up modestly, trading at 0.5455, marking a 1.0% increase above its three-month average. Moreover, CAD to JPY is hovering near 14-day lows at 106.8, remaining slightly above its longer-term average.
Despite the geopolitical uncertainties, a sustained increase in oil prices, which are currently trading at 69.67 - 2.5% above their three-month average, may provide the necessary impetus for the CAD to recover. Analysts suggest close monitoring of oil market trends and BoC policy shifts, which will continue to shape the loonie's trajectory in the coming weeks.
