The Canadian dollar has outperformed in recent weeks. That’s despite ongoing weakness in crude oil, which is Canada’s main export commodity. So, what’s driving the CAD higher? Expectation about tighter monetary conditions in Canada, after the Bank of Canada delivered a strong hint a couple of week about raising interest rates. Those expectations could be revised however in the event crude oil falls furthers and stays weak, or if incoming data deteriorates once again.
Last week saw four major central banks announce their policy decisions. Among them, the Bank of Japan remained quite dovish while the U.S. Federal Reserve and Bank of England learned surprisingly more towards the hawkish side. The dollar and pound showed moments of strength while the yen weakened across the board. But after a busy week of fundamental events, this week is set to be a quieter one in terms of economic data and central bank meetings.