The Canadian dollar was pressured by weakening oil prices, triggered by market fears as the US and China resumed trade talks. The Canadian dollar weakened due to falling crude oil prices and rising market demand against the US Dollar. Investors bet that the US Dollar will be the most promising currency amid the turmoil of the US-China trade that has not yet ended, and the global economic slowdown.
The weakening of the Canadian Dollar is reflected in the movement of the USD/CAD pair which is currently in the range of 1.3305. In the New York session last night, the US Dollar even rose to 1.3319 against CAD, which was the highest range in February. The DXY index that measures the strength of the US dollar against six other major currencies surged 0.45 percent on Monday (11/2), thus pushing the US dollar towards its strongest level since December 2018.
Canadian Dollar Shadowed By Weakening Oil Prices
As a commodity currency, the movement of the Canadian Dollar relies heavily on global economic conditions. The economic slowdown directly reduced demand for crude oil which is Canada's main commodity. The decline in oil prices early last week was due to investors' concern, when news spread that the US and China was restarting trade talks.
Brent oil prices fell to touch the level of $ 60.96 per barrel in the New York session last night, before finally returning to crawl up and closed at the level of $ 61.62 per barrel. Similar conditions were also seen in the movement of WTI oil, down to $ 51.17 per barrel which was the lowest level this month. It then rose and currently is in the range of $ 52.54 per barrel.
Despite weighing on oil prices, the global economic slowdown is considered not to have a negative impact on the US. That is the reason why the USD can continue to strengthen even though worries about the pace of world growth are increasingly widespread.
Ivey PMI Declines, Canadian Dollar Weakens
The Canadian dollar was further pressured by the Greenback, following a fall in the results of Canada's Ivey survey which dropped to its lowest level since September 2018. Purchasing Managers' Index (PMI) Ivey Canada dropped from level 59.7 to 54.7 in January 2019. This figure is the lowest in the last four months. The decline in manufacturing business optimism in Canada was even lower than the expected decline to level 56. The reason was the slowdown that occurred in the shipping sector of suppliers and the employment sector. As a result, the increase in the inventory sector was unable to cover the shortcomings of the two sectors.
USD/CAD Rebounds Due to Drop in Crude Oil Prices
The USD/CAD currency pair has skyrocketed in today's trade, due to the decline in crude oil prices by almost 1 percent. The Canadian dollar drastically weakened against the US Dollar in Wednesday's trade (6/February), due to the slump in crude oil prices and the impact of the appreciation of the US Dollar. The price of crude oil, which is one of Canada's main export commodities, retreated from a two-month high. This was due to reviving fears related to the global economic slowdown, particularly in connection with the latest dynamics of the European continent.
Canada is one of the countries that has a current account balance in a deficit condition, as well as one of the world's major commodity producing countries. Therefore, the economy is very vulnerable to changes in the global growth and trade outlook. This kind of fundamental analysis is important in forex learning, so be sure to check more news on Didimax to support your forex learning journey.
