Canadian Dollar Stable Against Peers, Weakens Slightly Against US Dollar

CAD Holds Its Ground in G10 Despite Slight USD Weakness

The Canadian Dollar (CAD) is showing relative strength across the G10 FX space despite posting a minor decline against the US Dollar (USD) on Friday. This dynamic reflects a mix of improved fundamentals and supportive external factors, particularly the inverse correlation between oil prices and CAD performance.

Oil Prices Fuel CAD Stability

Historically, the CAD and crude oil prices share a positive correlation, and this relationship has become more pronounced this week. Brent and WTI crude benchmarks surged in response to geopolitical tensions in the Middle East, providing a key boost to CAD strength.

“Oil appreciation continues to underpin CAD. In the current macro environment, commodity support is critical to the loonie’s resilience.”

USD/CAD Outlook and Policy Implications

Despite CAD’s broad resilience, the USD/CAD pair has edged slightly higher. However, the fair value (FV) estimate for the currency pair has declined significantly, now standing at 1.3613, marking a local low amid:

• Narrowing US-Canada yield spreads
• Rising crude oil prices
• Expectations of diverging central bank policies

Domestic risks include the upcoming Canadian manufacturing sales data (due 8:30 am ET), which may influence short-term volatility.

G7 Summit in Focus

Another key event on the horizon is the G7 leaders' summit, hosted in Kananaskis, Alberta from June 15 to 17. This may add geopolitical and economic headlines into the mix, subtly impacting CAD performance based on global investor sentiment.

Final Thoughts

While USD strength on safe-haven flows keeps USD/CAD slightly elevated, the underlying fundamentals remain supportive for the Canadian Dollar, particularly with oil markets offering sustained tailwinds.

Related: Oil Prices Retreat After Hitting 5-Month Highs Amid Middle East Escalation