The Canadian dollar is staging its late-April comeback against several of its G10 currency rivals. The loonie, which has been battered throughout much of the year, continued its rally midweek as the double-digit gains in crude oil prices lifted the currency. Could the Canadian dollar continue its upward trend next month?
Canada has endured a two-pronged financial crisis that has paralyzed the Great White North: the coronavirus pandemic and a collapse in crude prices. While analysts anticipate a more U-shaped recovery than a V-shaped one, the recent bump in oil futures and the stabilization of COVID-19 cases could mitigate the economic downturn.
On Wednesday, West Texas Intermediate (WTI) and Brent crude futures recorded noteworthy gains. June WTI futures surged $3.62, or 29.34%, to $15.96 per barrel on the New York Mercantile Exchange. June Brent futures tacked on $1.65, or 7.26%, to $24.39 a barrel on Londonâs ICE Futures exchange.
Energy exports remain a crucial part of the Canadian economy, so any significant change in crude prices â high or low â would play a huge role in growth prospects. It might not be ideal for consumers, but a lower loonie could potentially boost commodity shipments to its main trading partner: the US.
Crude is rallying on hopes of major economies reopening, a trend that would renew demand. It is also spiking on the smaller-than-expected US supply build of nine million barrels â the market had forecast an increase of 9.8 million barrels. US production levels slumped 100,000 barrels to 12.2 million barrels per day (bpd). These figures are fueling analystsâ projections that the energy market could rebalance later this year, but it ultimately depends on the demand recovery.
On Thursday, the February gross domestic product (GDP), March producer price index (PPI), and March raw materials prices will be released. Until then, markets are looking at Statistics Canadaâs latest report of Canadian foreign stock investment in February. According to the statistics agency, foreign investors acquired $20.61 billion of Canadian securities, up from the $16.81 in January, which was the largest investment since January 2019. Canadian investors raised their holdings of foreign securities by $6.1 billion.
The USD/CAD currency pair tumbled 0.57% to 1.3920, from an opening of 1.3997, at 17:04 GMT on Wednesday. The EUR/CAD dropped 0.26% to 1.5107, from an opening of 1.5143.
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Canadian Dollar Continues April Comeback As Crude Rally Lifts Loonie
