The Canadian dollar continues to find support as the price of oil climbs higher and the concerns over the renegotiation of the NAFTA agreement have softened in recent weeks. Ever since US President Donald Trump pulled out of the Iran nuclear deal the price of oil has been inching higher and this is helping strengthen the Canadian dollar. There is currently a good opportunity for selling Canadian dollars.
As a commodity currency and net exporter of oil the Canadian dollar tends to strengthen when oil prices rally. The Canadian dollar is likely to see further gains on the back of any other geopolitical tensions which are abundant at present. The cancelled summit between the US and North Korea also could see tensions escalate creating added uncertainty in the region and oil price fluctuations. NAFTA is also looking slightly more optimistic at present as the new deal continues to be renegotiated and investment appears to be heading back towards Canada.
The Bank of Canada meet tomorrow and this meeting should be keenly monitored for clues as to the path of future interest rate hikes. The central bank are keen to hike again but are reluctant to do so at this time with the uncertainties over NAFTA. Governor Stephen Poloz was cautious at the last meeting and I would expect a similar approach at this meeting. There have also been some concerns over business confidence in Canada which could temp the bank to pause for thought.
The pound has slipped further against the Canadian dollar as general uncertainty over Brexit continues to weigh on sterling exchange rates. Things should become very interesting with a vote in the House of Commons expected in the coming weeks which could see a high degree of political uncertainty. If the government is unable to reject the amendments which have been put forward by the House of Lords then there could be the prospect of a leadership challenge or worse still another general election.
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