Key Takeaways:
The Canadian Dollar pared earlier losses against its US counterpart on Monday, pushing USD/CAD to 1.3813 as a rebound in crude oil prices provided support for the commodity-linked currency.
"The intraday reversal in oil gave the Canadian Dollar a fresh bid after it had weakened earlier in the session," said Sarah Lin, markets analyst at Edgen. "The correlation between CAD and crude remains elevated given the geopolitical premium embedded in energy markets."
Brent crude recovered from session lows near $96.30 after falling as much as 7% earlier in the day on optimism that the US and Iran were moving closer to a peace deal that could reopen the Strait of Hormuz. West Texas Intermediate also bounced from a low of $90.88, though both benchmarks remained deep in negative territory for the session. The rebound was enough to trigger short-covering in the Canadian Dollar, which had sold off earlier as oil prices tumbled.
The move in USD/CAD came against a mixed backdrop for the greenback. The US Dollar Index edged up to 99.1 as investors rotated into safe-haven assets amid lingering uncertainty over the Middle East conflict, even as diplomatic channels remained active. US President Donald Trump said over the weekend that a memorandum of understanding with Iran had been "largely negotiated," though both sides later played down the prospects of an imminent breakthrough. Gold rose 1.2% to $4,561.51 an ounce, reflecting the cautious tone across markets.
On the data front, Canada's wholesale sales rose 0.1% in April, slowing sharply from a 1.9% gain in the prior month. Corporate profits for the first quarter fell 2%, deepening from a 1.6% decline in the previous period. The figures offered little direction for the Canadian Dollar, leaving oil prices as the primary driver of intraday positioning.
The Canadian Dollar's sensitivity to oil means further volatility is likely this week, with traders watching for any developments in US-Iran negotiations and Canada's first-quarter GDP report due later in the week. Economists expect GDP to expand 0.1% quarter on quarter, a marginal return to growth after a contraction in the prior period.
This article is for informational purposes only and does not constitute investment advice.
