Oil Price Surge Lifts Canadian Dollar Amid Fed Rate Hike Bets
The Canadian Dollar (CAD) is holding onto its gains as oil prices surge to over $90 per barrel, offsetting bets on a Federal Reserve rate hike. The USD/CAD pair traded around 1.3810 on Monday, down 0.15% on the day, due to underlying strength in the US Dollar.
The sharp rise in West Texas Intermediate (WTI) US Oil prices, which climbed back above $90 per barrel after a report of fresh strikes on Saudi Aramco oil facilities in Jizan, Saudi Arabia, supports the Loonie. Canada is a major oil producer and exporter, so higher oil prices improve the country's export revenue outlook and strengthen demand for the Canadian currency.
The US Dollar retains several sources of support, including expectations that the Federal Reserve could raise interest rates at its September meeting due to inflationary pressures fueled by high energy prices. Geopolitical tensions in the Middle East are also supporting the Greenback due to its safe-haven status.