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USD/CAD holds above 1.41 as oil outlook and US dollar strength dominate
Commerzbank’s Michael Pfister ties the move less to Canadian June jobs or the new US-Canada bridge, and says a sustained USD/CAD drop would likely need Fed-hike repricing or a US-Canada relations improvement such as a potential USMCA extension.
Commerzbank currency analyst Michael Pfister said the Canadian dollar weakness behind USD/CAD trading above 1.41 is driven mainly by expectations around oil prices and a strong US dollar, rather than by recent Canadian and US-Canada developments.
Pfister pointed to Canada’s June labour market report, which showed nearly twice the forecast job gains at 18,200, and to weekend reports that the United States and Canada agreed to open a new bridge. He argued those items are not the primary factors behind the exchange-rate move.
Instead, Pfister said the market is reacting to oil-linked expectations and broader US dollar strength, and that a sustained decline in USD/CAD would likely require either repricing expectations for Fed rate hikes or improved US-Canada relations, ideally through an extension of the USMCA.
He added that renewed escalation in the Iran conflict could lift oil prices and potentially support the Canadian dollar, but said durable downside movement in USD/CAD is more dependent on the interest-rate outlook or trade and diplomatic relations.