At the end of last week, following positive unemployment data the Canadian Dollar gained nearly a whole percentage point against Sterling, taking the rate into the 1.67s for the first time in 8 weeks. The rate has moved up from the lows of late however there could be potential for a return, especially as Canada’s largest export, oil, is currently high.
There was a certain optimism that following the data release that there could be another interest rate hike in the near future in Canada. There has however been some concern that the hype surrounding the unemployment boost is generating too much excitement and that there is still a long way for the Canadian economy to go before economic policy can change.
Oil Price Influence on the Canadian Dollar
The cost of a barrel of oil appears to be rising up towards the $70 which will help Canada to increase revenue as oil is it’s main export. Over the last two years the price of a barrel of oil has been low following a period where production surpassed demand, but that appears to have turned around and the price of oil is once again increasing.
In 2017 the Canadian Dollar was one of the strongest currencies in the developed world, strengthening against several major currencies throughout the year. As we enter 2018, following the good start to the year that could continue.
There could still be an element of uncertainty as the North American Free Trade Agreement (NAFTA) is set to be negotiated and Donald Trump is unhappy with the current deal. This could have a major impact as the US is Canada’s biggest export market, with any changes potentially having a significant effect on the business between the two nations and the region moving forward.
Whilst there isn’t any major changes expected to take place in the short term, anything that could weaken Canada’s economy could also have an effect on the Canadian Dollar.