CAD's Next Move May Depend Less on Oil

Commerzbank Research says the Canadian dollar's next move may not be about oil as previously thought. In a Thursday note, the bank argued that while energy exports have been rising since last summer and job gains are coming mainly from services, which make up a larger part of Canada's economy than oil and gas.

The bank pointed to improving business surveys, exports, and growth as signs that tariff uncertainty is fading. This can lift investment and non-energy exports by making companies more confident about cross-border demand. Oil prices may still affect the CAD on a daily basis, but trade headlines are becoming increasingly important over months because they influence both the trade outlook and what investors expect from the Bank of Canada.

FX analyst Michael Pfister added that the central bank is unlikely to consider interest rate hikes until the recovery looks durable. At this point, the CAD tends to get more lasting support.