Oil Price Surge Fails to Boost Canadian Dollar Amid Rate Differential Pressure

The Canadian dollar remains under pressure despite oil trading above $100 a barrel. The USD/CAD has risen for four consecutive sessions and is approaching 1.3920, with wide US-Canada rate differentials and defensive demand for dollars outweighing the support from crude.

The Canadian August CPI report matched expectations, giving markets no reason to bring forward Bank of Canada tightening or narrow the rate gap ahead of Wednesday's Federal Reserve decision.

Higher energy prices have lifted oil prices while adding to inflation concerns, weighing on equities and strengthening demand for the US dollar. Trade tensions add another risk to Canadian growth and the expected Bank of Canada path, although they appear to be reinforcing the move rather than driving today's direction.