Canadian Dollar Strengthens Against Safe Haven US Dollar
Arslan Butt • 1 min read
The Canadian dollar continues to trade strong after rising close to a three-month high against the US dollar during the previous session, supported by a weakness in the greenback as the risk appetite returned to markets over hopes of economies reopening. At the time of writing, USD/CAD is trading around 1.353.
The risk-on sentiment in global financial markets has not only only driven a rally in stock markets but also sent crude oil prices higher, benefiting the CAD. With economies around the world easing lockdowns and resuming activity, crude oil prices have been gaining, driving strength in the Canadian dollar, which shares a positive correlation with oil prices.
Meanwhile, the safe haven appeal of the US dollar has diminished due to the same sentiment, driving further bearishness in USD/CAD. The USD has also come under pressure due to the various liquidity measures implemented by the Fed when the coronavirus outbreak initially hit the world.
USD/CAD also edged lower after recent data releases revealed a slowdown in contraction of the Canadian manufacturing sector from April to May. Canada’s manufacturing PMI soared to 40.6 in May from the record low reading of 33 during April, even though it continues to remain under the 50-threshold indicating contraction.