U.S. Dollar continues to fall against the Canadian dollar over the last couple of sessions, supported by significant growth in crude oil prices and positive reports from several different economic indicators in the last week.
North American dollar trades just above the lowest level of this year during Thursday trading, amid the massive rally in crude oil prices. Crude oil prices are currently hovering around $50 a barrel following a rally of above 20% since the start of this month.
Canada’s economy is heavily dependent on crude oil and commodities exports to the international markets. The rally in crude prices always has a positive correlation with the loonie and the Canadian economy.
At the end of Thursday trading, US dollar declined to 1.27 against the loonie, the lowest level in the last eight weeks.
Disappointing core retail sales report and the decline in PPI data put a lot of pressure on the U.S. dollar. North American core retail sales dropped 0.3%, compared with the same period of last year, while PPI came in at negative 0.4%. U.S. CPI data also remained flat with last year level. Ambiguity about the Fed’s policy on interest rate has also been impacting the USD exchange rate against the basket of other currencies.
On the other hand, Canadian Manufacturing Sales increased 0.8% in June, relative to the decline of 1.0% in May. Canadian loonie is likely to expand its upward momentum in the coming days, as crude oil prices are unlikely to dip back to the level of $40 a barrel. In fact, prices are likely to extend their rally on the potential production freeze agreement among the largest producers.