WTI crude oil roses as high as $90.65 today but with an Iran nuclear deal now looking more likely, it crumbeld to $86.17. That’s the lowest since January.
Yet the loonie is higher today and much stronger than its commodity cousins in Australia and New Zealand. To be fair, some of that is catch-up from CAD underperformance but it’s unusual to see the loonie at the top of the FX leaderboard on a day with oil down nearly 4%.
Part of the answer lies in natural gas. Henry Hub is up 7% today in part due to a German denial about shutting down nuclear. But gas has rediscovered some momentum and at $9.32 this would be a new high close for the cycle.
Combine that with the strong mood for risk assets and the loonie has shrugged off the oil drop.
USD/CAD is down 73 pips on the day to 1.2832. That’s in the middle of the recent range but at the 61.8% retracement of Monday’s gain.
I don’t think CAD can disconnect from oil for long so the dynamic will be worth watching closely. But there’s a growing sentiment that Canada is well-positioned for the next economic cycle. Power is plentiful in the country and its natural gas supplies are bountiful. If there’s a boom in mining, it also stands to benefit.