CAD Strengthens Against USD as Oil Prices Rebound
The Canadian Dollar (CAD) has strengthened against the US Dollar (USD), partly due to a rebound in Oil prices. The price of Crude oil received support after Yemen's Houthis claimed responsibility for an attack on a Saudi vessel in the Red Sea, temporarily raising concerns over global energy supplies.
However, hopes of a diplomatic breakthrough in the Middle East, specifically a 60-day temporary arrangement to reopen the Strait of Hormuz, have limited further gains in Oil prices. The proposed framework would establish a pathway for nearly 20% of the world's energy supply to flow through the strategic waterway.
The US Dollar remains under pressure after weaker-than-expected ADP employment data, which showed private payrolls increased by 44K in July, below the market expectation of 70K. The release follows softer economic data earlier this week, reinforcing expectations that the Federal Reserve could adopt a more accommodative stance.
Analysts at Scotiabank highlight that the Canadian Dollar has lagged its peers, but stress that some pick-up in the currency appears overdue due to improved CAD fundamentals and relative US/Canada data outcomes. From a technical perspective, they maintain a 'bearish, CAD' stance, observing that while 'CAD technicals remain choppy' there is 'stronger evidence emerging that the CAD is better positioned to reverse more of its May/June decline.'