What’s Driving the Bullishness in the Canadian Dollar?

Ahead of the release of employment reports from both Canada and the US, the Canadian dollar is trading close to a one-month high against the US dollar, boosted by the BOC’s recent hawkishness and by a weakness in the USD. At the time of writing, USD/CAD is trading at around 1.318.

Earlier this week, the Bank of Canada (BOC) decided to hold its interest rates steady at 1.75% and expressed optimism regarding the state of the Canadian economy, supporting the CAD. The BOC’s recent statements have reduced the likelihood of a rate cut at its next meeting in January from 20% to less than 10% for now, as a result.

The Canadian dollar has also strengthened following the bullishness in crude oil prices recently. The CAD and crude oil share a positive correlation as oil is one of the key exports from Canada, and oil has been making gains after the OPEC agreed to enforce additional supply cuts starting early next year.

In more positive developments for the Canadian economy, Canada’s trade deficit narrowed to CAD 1.08 billion as a result of rise in imports as well as exports. Meanwhile, Canada’s Ivey PMI surged to a three-month high of 60.0 in November from 48.2 in the previous month, boosted by higher inventories and supplier deliveries.