Relationship Between Crude Oil And CAD
Wednesday, May 29, 2013
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Historically speaking, crude oil and the Canadian buck have had a very well interlinked relationship, positively correlated through the production of oil and the supply of oil to the worlds largest consumer – the USA.
Canada holds the 2nd biggest oil reserves in the world world number one being Saudi Arabia. A large amount of Canada’s oil reserves are pumped directly to the USA, making Canada the biggest energy source for the U.S. economy. Traders are well known to focus on crude oil prices when trying to gauge CAD’s direction of trading.
The correlation between crude oil and CAD has normally been very easy to trade and exploit, however investors in the last few weeks have witnessed the price of crude oil quickly drop while with the Canadian dollar declined only a few basis points. Most likely, this occurred for two different fundamental reasons: oil dropped through re-pricing of the global demand, while CAD traded mostly range-bound, fiscal marketplace saw more dollar than it would ever need (the marketplace stayed in risk-aversion mode).
Ayman Khlifat on Twitter
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Forex And Commodities
