dollar is considered a safe-haven currency. If inflation data in the United States allows for a pivot in Fed rhetoric, the loonie could find support.
Conditions That Could Spark a Loonie Recovery
The loonie, being a risk-sensitive commodity currency, tends to sell off in such scenarios, even if the underlying commodity price is rising. Concurrently, West Texas Intermediate (WTI) jumped past the $95 per barrel mark.
Canadian inflation cooling faster than expected reduced BoC urgency. Traditionally, higher oil prices provide a tailwind for the Canadian dollar, as the economy is heavily weighted toward energy exports.
Conditions That Could Spark a Loonie Recovery
45% WTI Crude $96. This gap in interest rate expectations causes capital to flow toward USD-denominated assets offering higher yields, pressuring the loonie regardless of oil fundamentals.
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