Sterling has been on a charge over the last few days as the markets starts to price in a UK Remain Brexit victory. The influence of President Obama over the last weekend has led investors to believe the Leave campaign is looking less likely to achieve a victory.
The CAD has however seen sustained strength against the Euro with the rate at a level last available in November 2015. The main reason for CAD strength is the recent improvement in the cost of a barrel of Oil which currently resides at $45. Moreover the recent weakness in the Dollar has meant that purchasing goods from the US has become significantly cheaper.
Will the CAD Keep Improving?
One of the only concerns for the Canadian Dollar is the fact its strength is not self-generated. By that I mean external factors are influencing the currency movements, whilst this is very common in a commodity currency (A currency based on raw materials eg. Oil, Iron Ore, Dairy) it does means the price can change very fast. If there was to be a sudden drop in the price of Oil for example the CAD would lose value instantly. This can often mean that when a rate gets to a level you’re happy to trade at, it’s certainly worth not holding on for further gains as they may never come.
Due to the cost of a barrel of Oil being so low compared to the last few years I expect there to be a steady rise which would imply CAD to move also. The recent troubles with the OPEC nations and the introduction of Iran after their sanctions were lifted to the oil production market, it would not be surprising if there is plenty of volatility.