US Dollar (USD) Levels Out against Canadian Dollar (CAD) as Oil Prices Rise

May 9, 2016 - Written by John Cameron

STORY LINK US Dollar (USD) Levels Out against Canadian Dollar (CAD) as Oil Prices Rise

While the Canadian wildfires have not yet been extinguished, the rising price of oil has nonetheless supported the Canadian Dollar and conversely seen the US Dollar lose out in the pairing.

The US Dollar seems set to continue being at an advantage against the Canadian Dollar in the future, as long as the price of US oil remains more favourable that that of the now limited supplies found in western Canada.

Speculation of Long-Term Delays to a Federal Reserve Rate Hike Predicted to Weigh on US Dollar

The weekly Commodity Futures Trading Commission (CFTC) data, published every Friday afternoon, provides market participants with a valuable insight into where institutional investors see the world’s leading currencies heading.

Friday’s data, which covered the seven days leading up to Tuesday 3rd May, revealed that institutional investors held the highest volume of ‘down bets’ on the US Dollar (currency : USD) for some three years. Net ‘short’ positions on the Buck, (bets that the Dollar will lose ground), stood at $6.46 bn – this represented a significant rise from the previous week’s showing of $4.19 bn.

Analysts agreed that the shift out of the Greenback was driven by the generalised decrease in expectations that the US Federal Reserve will be hiking its headline interest rate in the short term.

This month’s US Non-Farm Payrolls data and overall joblessness statistics, also published on Friday afternoon, both disappointed, leading FX insiders to forecast that speculative bets against the Dollar will increase for the fourth month on the trot when this week’s edition of the CFTC numbers are released on Friday.

Wildfire in Canada Continues to Impact Oil and Crude-Correlated Assets

Elsewhere, a dire warning from Canadian authorities that the wildfire which continues to rage in Fort McMurray, could be set to double in size, is forecast to have a pronounced effect on the global currency markets this week.

By the middle part of Saturday, the fire covered an area larger than New York City, causing a cessation of production at the vast Fort McMurray oil refinery.

Traders were already pricing-in the attendant decrease in supply before the markets shut on Friday and, with the situation likely to deteriorate this week, further losses are predicted for the price of a barrel of Brent Crude.

If such an outcome materialises, then look for the Pound Sterling (currency : GBP) to incur renewed losses against the oil-driven Canadian Dollar (currency : CAD) and the Norwegian Krone (currency : NOK).

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TAGS: American Dollar Forecasts Canadian Dollar Forecasts