For more than a year now, commodity prices have been under pressure from the strong U.S. dollar and slowing global demand. This has made a huge dent in the balance sheet of many net exporters of resources, in turn weakening their currencies.
With the Bank of Canada shifting from dovish into neutral territory and oil prices breaking out, we’ve been bullish on the Canadian dollar since last week’s big breakdown in USD/CAD), but the Loonie has actually been showing strength against the other currencies for a couple of weeks now.
The dollar’s relationship with commodities was in full force last week. The sharp increase in the price of oil (up more than 10% since April 8) was in stark contrast to the dollar, which fell sharply against its G10 counterparts, as you can see in the chart below.