Two fundamental factors are driving USDCAD in opposing directions. Which of these two fundamental aspects is stronger? It will depend on both the economic and political developments. In the months ahead, there could be an increase in currency pair volatility. Tomorrow’s release of important economic data could impact future expectations.
The basic issues that could guide loonies over the next few months can be summarized roughly as follows:
- Policy: Particularly the growing gap in monetary policies between the Fed and Canada’s BOC, where the Canadian central banks keeps rates stable but expects its counterpart to hike. This will likely be more significant in the long term as investors adjust to different expectations about rates and the economy.
- Oil: Recent voluntary production curtailments by OPEC+ led to a significant rise in crude oil prices. However, Canada’s main buyer is the US, and expectations for demand for fuel south of the border will depend a lot on how the economy is seen developing in the coming months.
The US’s ability to slip into recession is dependent on many factors…
