USD/CAD - Canadian Dollar Rallies with Oil Prices

Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates

The Canadian dollar gapped higher in Asia when oil prices surged upwards. West Texas Intermediate jumped to $63.15 U.S./barrel after closing on Friday at $54.83/b after news that drone attacks on Saudi Arabian oil fields knocked over 50% of the Kingdom’s oil production offline. There isn’t any word when production will resume. The U.S. blamed Iran for being behind the attacks, and President Trump announced that America was "locked and loaded." He also authorized the release of oil from the U.S. Strategic Petroleum Reserves which helped prices to ease.

The Canadian dollar rallied. USD/CAD dropped from $1.3287 at Friday’s Toronto close to $1.3210 at the Asia open. Prices drifted higher during the European session and started trading in Toronto, just above the mid-point of the overnight range. External developments will be the major driver of Canadian dollar moves this week, leaving domestic data to muddy the waters. Canada Manufacturing Sales, Inflation and Retail Sales reports are due Tuesday, Wednesday and Friday, respectively.

Weaker-than-expected Chinese data and comments from the Chinese premier may have exacerbated global recession fears. China August Retail Sales, (Actual 7.5% y/y vs forecast 7.9% y/y and July 7.6%y/y) and Industrial Production, (Actual 4.4% y/y vs forecast 5.2%) missed their forecasts, underscoring the negative impact from U.S. tariffs. Chinese Premier Li Keqiang warned that the economy was facing downward pressure and that it "is difficult" for their economy to grow at 6%. The news weighed on the New Zealand dollar.

The Japanese yen jumped as investors sought safe-haven currencies. USD/JPY also came under pressure when U.S. Treasury yields fell. 10-year Treasury yields dropped from 1.92% to 1.82% on fears that a prolonged oil price spike combined with ongoing U.S./China trade war, would lead to a global recession.

The British pound traded nervously. Prices consolidated Friday’s gains but drifted off Friday’s closing level. Short GBP/USD positions continue to be squeezed on hopes that the U.K. will avoid a "NO-DEAL" Brexit in two weeks. Prime Minister Boris Johnson is meeting European Union President Jean-Claude Juncker today. The E.U. is waiting for Britain to propose an alternative to the Irish backstop plan. Johnson is adamant that the U.K. will leave the E.U. if there is not a deal and he will not except any extensions.

EUR/USD safe-haven demand was more than offset by last weeks ECB announcement of another quantitative easing program and interest rate cut. EUR/USD is trading at the bottom of its overnight $1.1029-$1.1085 range.

There isn’t much in the way of actionable economic data from Canada or the U.S. In addition, traders may keep their powder dry ahead of Wednesday’s Federal Open Market Committee meeting.

Rahim Madhavji is the President of, a Canadian currency exchange that provides better rates than the banks to Canadians
Learn how KnightsbridgeFX can help you save up to 2% when buying or selling US dollars compared to your Canadian bank’s rates – click here to compare bank rates