The Canadian dollar (CAD) has exhibited muted performance recently despite a rise in oil prices, primarily due to its correlation with the US dollar. Following weaker-than-expected employment data, which revealed a loss of 65,500 jobs in August and a rise in the unemployment rate to 7.1%, bearish sentiment around the CAD has surged to a five-month high. Analysts note that non-commercial net short positions increased significantly, raising the likelihood of potential interest rate cuts by the Bank of Canada (BoC) during its upcoming policy meeting.
While some analysts forecast a strengthening of the CAD, projecting a rise to approximately 1.36 per USD in three months, the prevailing sentiment remains cautious. The current bearish outlook is further supported by expectations of weaker inflation as indicated by consumer price index figures, which could compound pressure on the loonie. Market participants are closely watching the BoC's decisions and the implications of any policy adjustments on investor confidence in the CAD going forward.
The CAD's latest movements show it trading at 7-day highs near 0.7260 against the USD, just below its 3-month average. Meanwhile, the EUR and GBP exchanges reflect minor declines against the CAD. The CAD to EUR pair hovers around 0.6171, while the CAD to GBP is positioned at 0.5337. Notably, against the JPY, the CAD remains near its 3-month average at 107.0.
Despite its current struggles, rising oil prices—a key factor for the Canadian economy—may still provide support in the long run. Recent oil prices have increased to $62.29 per barrel, yet they remain below the 3-month average of $68.76 and have experienced significant volatility. As Canada's economic outlook evolves, understanding market trends related to oil prices and interest rates will be essential for those managing foreign exchange activities involving the CAD.
