05.01.202615:31:37UTC+00Canadian Dollar Extends Downturn

The Canadian dollar has weakened to approximately 1.38 against the US dollar, pulling back from its peak since July, which was achieved in late December. This shift is attributed to the strengthening US dollar, influenced by geopolitical developments, and diminishing support for Canada's currency. The apprehension of Venezuela's leader by US forces led to an immediate surge in demand for the dollar. This is due to markets reassessing regional risk and anticipating renewed US access to Venezuela's significant crude oil reserves, placing pressure on currencies tied to commodities. Additionally, speculation regarding future Venezuelan oil production and a mixed initial price response have heightened concerns that a sustained decrease in crude prices could undermine a fundamental source of Canada’s external revenue and currency stability. Furthermore, the global oil outlook through to 2026 appears less optimistic, with expectations of ample supply and tempered demand further challenging the strength of the Canadian dollar. Domestically, the momentum of economic growth decelerated into the fourth quarter, weakening support for a firm Canadian monetary policy stance.