Canadian Dollar to US Dollar (CAD/USD) Exchange Rate Higher on Oil Price Rise

Although Thursday’s US reports impressed, the Canadian Dollar to US Dollar (CAD/USD) exchange rate held a 0.4% daily gain. The ‘Loonie’ surged against a number of its peers as the price of crude oil, Canada’s main commodity, climbed by 0.6% in response to geopolitical conflict. With Saudi Arabia launching airstrikes on Yemen, the price of crude rallied back to 58 Dollars per barrel and dragged the Canadian Dollar higher with it.

According to one analyst; ‘The surge we’ve seen in prices over the last 24 hours or so has been a bit of an overreaction [but] the Houthi takeover in Yemen does have significant geopolitical repercussions in that it adds to Iran’s growing regional clout.’ While Canadian data has been in short supply this week, the ‘Loonie’ was able to gain by 0.45% against the US Dollar, 0.6% against the Euro, and 0.5% against the Pound on Thursday. The Canadian Dollar was lent additional support as Bank of Canada Governor Stephen Poloz defended the central bank’s January rate cut and asserted that the move has helped to produce stable inflation expectations.

Poloz commented; ‘The negative effects of lower oil prices are beginning to appear. The positives take longer to emerge. So we need to watch these competing forces play out in the economy. We will continue to follow policies necessary to ensure a timely return of inflation to target while being mindful of financial stability considerations. Ultimately, our credibility will hinge on how well we meet our mandate over extended periods of time.’

The CAD/USD gains would have been more substantial were it not for the US publishing some better-than-forecast reports during the local session. While the number of people applying for first time unemployment benefits fell in the week ending March 21, the US Markit Services PMI climbed by more-than-expected. If oil prices hold or extend gains before the weekend, the ‘Loonie’s bullish run could continue.