Home Daily Commentaries Loonie faces downward pressure amid falling oil prices

Loonie faces downward pressure amid falling oil prices

Daily Currency Update

The CAD faced downward pressure as oil prices declined, driving the USD/CAD pair higher. West Texas Intermediate (WTI) oil prices broke their two-day winning streak to hover near $77.80 a barrel. The obstacles encountered by the oil market, attributed to increased borrowing costs, have affected global economic growth and diminished oil demand. The USD/CAD duo traded around 1.35736 after hitting a high near 1.36048. Today saw the release of US Gross Domestic Product (GDP) data at 3.2%, Canada’s GDP data release will follow tomorrow.

Key Movers

The US Dollar Index (DXY) climbed past the 104 threshold this morning, reaching a peak of 104.216, but subsequently declined near 103.977 following the release of US Gross Domestic Product (GDP) data. Today marked the second estimate of GDP for the last quarter of 2023. The data revealed a 3.2% annualized growth, slightly below the anticipated 3.3%. Market projections indicated a likelihood of unchanged interest rates through March and May, with potential rate cuts in June. Other notable news for today will include speeches from Federal Reserve members Raphael Bostic, Susan Collins, and John Williams.

The EUR/USD experienced a rebound today, recovering from its low of 1.07998, and looking to surpass the 1.08303 level. Investors were closely watching vital inflation data from major Eurozone economies to help find insights into the potential policy direction of the European Central Bank (ECB). Traders anticipated a 90 basis point (bps) rate cut from the ECB within the year.

The GBP/USD hovered around 1.26493, having dipped to approximately 1.26252. Anticipated shifts in interest rates by the Bank of England (BoE), aligning with actions taken by other major central banks like the Fed and ECB, likely caused this movement. The potential reduction in rates was linked to sustained high price pressure in the UK, driven by elevated wage growth. Market participants will continue to eye August as a potential timeframe for the BoE to initiate rate cuts.

 

Expected Ranges

  • EUR/CAD: 1.4665 - 1.4712 ▲
  • GBP/CAD: 1.7143 - 1.7189 ▲
  • AUD/CAD: 0.8807 - 0.8858 ▼
  • USD/CAD: 1.3518 - 1.3599 ▼

Written by

Haroon Sheikh

OFXpert

As a Financial Risk Analyst at OFX, Haroon’s primary focus lies in examining and assessing operational risks, liquidity risks, credit risks and to conduct comprehensive data analysis for informed decision-making. He actively contributes to the implementation of new policies aimed at long-term risk mitigation, with a keen eye on forward contract margins and strategic forecasting.