Canadian dollar (CAD) Market Update
The Canadian Dollar (CAD) has experienced a period of fluctuation amid improving oil prices but with little domestic data to bolster its momentum. While oil prices have been a key factor influencing the CAD's movements, a lack of data releases has prevented any significant gains. Despite hitting 5-month highs towards the end of 2023, the CAD faced a sharp decline in early January due to robust US macro data and stagnant Canadian labor market conditions. The CAD is expected to continue its association with oil prices this year, although the correlation with crude oil has somewhat weakened.
FX analysts from CIBC Capital Markets have adjusted their year-end forecast for the USD/CAD exchange rate in 2024 to 1.31, indicating a projected strength of the US Dollar against the Canadian Dollar next year. However, there is optimism for the Canadian Dollar in 2025, with expectations of a weaker USD against other major currencies. The uncertainty surrounding the Chinese and global economic growth outlook, alongside tensions in the Middle East, has kept key commodity prices in check, moderating the CAD's performance.
Recent price data shows that the CAD to USD pair is trading at 7-day lows near 0.7389, while the CAD to EUR pair sits at 7-day highs near 0.6790. The CAD to GBP pair has dipped below its 3-month average, standing at 0.5793, and the CAD to JPY pair is near its 3-month average. Additionally, the OIL to USD price is currently 5.8% above its 3-month average at 85.11. With ongoing attention on US economic activity and Federal Reserve policy changes, the CAD's performance is likely to remain closely tied to oil price movements and global market dynamics in the near term.