Loonie capitalizes on soaring oil prices and weak USD
Thursday 23 March, 2023
Daily Currency UpdateThe Canadian dollar took advantage of the US dollar weakness along with strong oil prices to reach a two-week high against the USD, driving the USD/CAD pair below 1.3655. Canadian retail sales data will be released tomorrow and will provide investors with an indication of the strength of the Canadian economy.
Rising for the fourth consecutive day, West Texas Intermediate (WTI) crude oil continues to rebound from earlier this week when it hit its lowest level since December 2021. The price of crude oil is currently up 0.52% near $70.30 per barrel. The positive gains in oil prices support the hopes for increased energy demand due to optimism surrounding China.
Key MoversThe US dollar plummeted for the sixth day in a row as it heads for its longest losing streak in 2 and a half years. The DXY dollar index is trading around 104.50. The overall weakness in the dollar can be attributed to the dovish Federal Reserve. At their meeting yesterday, the Federal Reserve raised the federal funds rate by 25 basis points to bring its policy rate from 4.75% to 5%. Fed Chairman, Jerome Powell, provided the following comments regarding the decision: “Although a pause in increasing the rate had been considered, ultimately the decision for another rate increase was due to the goal of fighting inflation.” He went on to comment on the crisis in the banking sector, stating that tighter financial conditions could lead to the Fed raising rates less than anticipated.
Weekly initial jobless claims for the week ending on March 18 came in better than expected. The US Department of Labor reported there were 191,000 initial claims versus the market's expectation of 197,000 following the previous week's print of 192,000.
The EUR took advantage of the overall weakness in the US dollar and hit a multi-week high of 1.0930 before consolidating its daily gains below the 1.0900 mark. The EUR has now traded positively for the last six trading sessions and has rose close to 3.6% against the dollar. With the US dollar struggling to make a meaningful comeback, the EUR/USD pair is likely to stay in positive territory.
The pound retreated from an intra-day high of 1.2340 to trade around 1.2300 after the Bank of England (BoE) announced its rate decision. As expected, the BoE raised the rate by 25 basis points to 4.25%.
- EUR/CAD: 1.4788 - 1.4933 ▼
- GBP/CAD: 1.6776 - 1.6859 ▼
- AUD/CAD: 0.9153 - 0.9226 ▼
- USD/CAD: 1.3632 - 1.3736 ▼