Canadian Dollar Strengthens as Market Sentiment Improves, Crude Oil Gains
Arslan Butt • 1 min read
The Canadian dollar continues to make gains against the US dollar after strengthening by 0.4% in the previous session, boosted by an improvement in the market sentiment and gains in crude oil prices. At the time of writing, USD/CAD is trading at around 1.393.
The risk appetite in global markets appears to be making a comeback with stock markets trading in the green while investors move away from the safety of the greenback and towards trading riskier currencies, including the Canadian dollar. Rising expectations of resumption of economic activity, at least partially, in several countries has helped drive bearish moves in USD/CAD lately.
The Canadian dollar is closely linked to crude oil as oil is one of Canada’s key exports. Over the past couple of sessions, crude oil prices have started moving higher as traders hope for a rise in demand in oil as some European countries and US states look to restart parts of their economies in the coming weeks.
Canada’s PM Justin Trudeau has also hinted at the possibility of resuming economic activity across Ottawa and other provinces of the country, which has further boosted the CAD against the USD. Canada’s economy is experiencing the most severe recession ever recorded as a result of the coronavirus pandemic, further weighed down by a collapse in oil prices.
Any resumption of economic activity will help Canada’s GDP post a rebound, although complete recovery could take much longer than previously forecast. Economists expect the BOC to roll out more stimulus measures towards boosting economic recovery in the near future.