The Canadian dollar weakened against its US counterpart on Tuesday to touch the lowest level in more than a year after stop loss orders were triggered amid broadening losses for the loonie. The Canadian currency came under pressure in recent trading sessions as oil prices continued to fall and uncertainty surrounding the Canadian trade relationships with the United States increased.
Crude oil moved below $50.0 to touch the lowest level in five weeks today as reports of rising production in Libya and the United States weighed on oil prices. The Libyan production is returning to its normal level after protests in Sharara oil field, which had blocked the fieldâs pipelines, came to an end.
Oil traders now await the outcome of a meeting that will be held by the Organization of the Petroleum Exporting Countries later this month. The meeting, which will look into extending an agreement reached last year that limits oil production until June, could prove to be the last resort for oil prices to maintain their recovery. The Canadian dollar is closely tied to oil prices since crude oil is one of Canadaâs main exports.
Recent trade policy moves in the United States increased the downward pressure on the loonie. The future of trade relationships between the worldâs largest economy and its northern neighbor are looking increasingly uncertain. The US Department of Commerce decided to impose new tariffs on softwood lumber imports from Canada that averaged 20%, which caused fears of trade interruptions to notably grow. The decision was soon followed by a tweet from President Donald Trump that threatened Canadian exports of dairy products to the United States.
The Canadian dollar may become weaker if the gap between the US and the Canadian monetary policies grew wider. The US Federal Reserve will end its latest policy meeting tomorrow and is expected to signal a possible interest rate hike in June in a statement that will follow the meeting. Meanwhile, the Bank of Canada appears to be in no hurry to raise its interest rates.
USD/CAD traded at 1.3724 as of 18:30 GMT on Tuesday from 1.3749 at 15:35 GMT, the pairâs highest level since February 2016. USD/CAD began trading today at 1.3675. GBP/CAD was at 1.7734 from 1.7767 at 15:20 GMT, a level last seen on June 2016. GBP/CAD started the day at 1.7636.
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