On Monday, oil prices rallied after a three-straight-week
distress, marking a good start of the week for the loonie. The price rebound
caused the Canadian dollar to push higher against the greenback. Investors returned to the market to hunt for
cheap valuations following contemporary losses. Moreover, the latest BoC
statement triggered optimism about the recovery of the economy.
Lower U.S. and Saudi
Arabia Oil Supply
Reports reveal that oil has risen by 0.812%. United States is
having lower inventories at the moment and Saudi Arabia is imposing supply
limit to Asian markets and these present circumstances have helped Canadian oil
to ascend. Last Wednesday, U.S. weekly oil inventories were released.
Last week, tension between Qatar and the Arab nations pressed
oil down by more than 5%. July West Texas Intermediate crude added 25 cents
(0.6%), making oil priced at $46.08 per barrel on the New York Mercantile
Exchange. Meanwhile, August Brent crude (global oil benchmark) increased by 14
cents (0.3%) resulting to an oil price of $48.29 per barrel on the ICE Futures
Europe Exchange.
BoC Early Rate Hike
Deputy Governor Carolyn Wilkins of Bank of Canada stated that
the policy makers now have the “reason to be encouraged” since the nation’s
revival extends throughout regions and sectors of the country. Current worries
about Toronto’s housing market can be set aside and policy makers can focus on
potential growth instead.
She further said, “As growth continues and, ideally, broadens
further, Governing Council will be assessing whether all of the considerable
monetary policy stimulus presently in place is still required.”
It is the strongest signal from the BoC that, finally, it is
ready to elevate interest rates.
The words from Wilkins lifted the loonie since the market is
anticipating a rate hike by 2018, as soon as the present year ends.
USD/CAD Exchange Rate
On Monday, it was reported that the USD/CAD had a 0.694
percent drop and is trading at 1.3373. The comments of the BoC Deputy Governor
plus the recovering of oil prices is helping the Canadian dollar make its
progress on the market.
The U.S. dollar index (greenback’s measure of strength versus
six major currencies) fell at 97.12 from last Friday’s 97.47.
However, experts declare that should the oil lose stability
in the coming days, the market reaction and optimism it sparked might take a
reversal.
On July 12, policy makers are set to have the next interest
rate announcement and Monetary Policy Report.
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Loonie Advances on Rising Oil Price and BOC Rate Hike
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