The Canadian dollar is flat this morning but it is already trading at the highest levels since February of 2018. Friday’s stronger-than-expected jobs number was the catalyst for the Loonie’s latest move up but there are a number of factors supporting the currency right now. Oil prices are firm and hovering around multi-year highs. The overall positive risk sentiment is also helpful to the Canadian dollar which is perceived as a “risk” currency. Also, the currency has been correlated to equities for the last few months and stocks are now trading at record levels. Finally, there is a growing view that the Bank of Canada will announce a reduction of its asset purchase program in its April in the face of the strong-than-expected recovery. On the other hand, the main short term risk to the Canadian dollar remains US bond yields. If they continue to creep up, you can expect the Loonie to give up its recent gains. Wednesday will be an important day for USD to CAD as we will get February inflation figures in Canada and a press conference by the Federal Reserve in the US.
