The Canadian dollar (CAD) is currently experiencing mixed influences as it is buoyed by a stronger US dollar. The loonie has shown some resilience, measured at 90-day highs near 0.7369 against the USD, which is 1.7% above its three-month average of 0.7241. CAD has maintained a stable range from 0.7011 to 0.7369, but its upward momentum is being constrained by declining oil prices, which are highly correlated with the currency given Canada’s position as a major oil exporter. Recent oil prices are at $68.80, a figure that is 3.2% above the three-month average, but fluctuations remain significant, with a range of 31.1% from $60.14 to $78.85.
Looking ahead, the release of Canada’s June services PMI today may play a crucial role in shaping the currency's trajectory. Analysts suggest that if the services sector reveals continued contraction, the loonie could struggle to maintain its current strength. Furthermore, potential trade tensions between Canada and the U.S. could pose additional risks as tariff impositions create uncertainty.
In terms of monetary policy, the Bank of Canada’s recent decision to pause interest rate cuts at 2.75% has lent some support to the CAD. This move contrasts with rising concerns from trade policy uncertainties that have been affecting investor sentiment. Economists have indicated that a robust U.S. economy generally underpins demand for Canadian goods; however, ongoing trade tariffs remain a considerable concern, limiting upside potential for the CAD.
Other CAD exchanges present varied performance: CAD to EUR stands at 0.6259, which is 1.6% below its three-month average, while CAD to GBP is slightly below average at 0.5390. Notably, the CAD to JPY has also shown strength, trading at 106.7, 2.0% above its average.
In summary, while the CAD has some support from favorable oil markets and a stable U.S. economy, traders should remain cautious of external pressures from trade relations and upcoming economic releases, as these factors will heavily influence the loonie's performance moving forward.
