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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