The Canadian dollar has weakened during the last weeks despite surging energy prices. According to National Bank of Canada analysts, the correlation is unusual, and they see that energy prices should decline further or the loonie strengthen.
“The Bank of Canada’s index for the price of energy commodities produced in Canada (oil, natural gas, coal) reached a multi-year high early in the fourth quarter. Despite this surge, the Canadian dollar has weakened in recent months. It is unprecedented to see the CAD so weak given current prices. Something has to happen: either energy prices fall or the loonie strengthens.”
“Given that we don’t see much downside to energy prices in the coming months, we think the CAD should improve.”