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According to Krishen Rangasamy, Research Analyst at National Bank Financial, the Canadian dollar is on track to lose ground against the USD this year, but the depreciation could have been much more brutal.

Key Quotes

“Western Canada Select (WCS) oil price and the 2-year interest rate spread with the U.S., both major drivers of the Canadian dollar, are now at January 2016 levels. And yet, USDCAD is trading near 1.32, about 10 cents below levels of early 2016. So why is the loonie not collapsing this time round?”

“Despite ongoing headwinds, the economic outlook is arguably more positive than say two years ago. The trade sector is benefiting from a booming economy stateside, while domestic demand is also holding firm thanks in part to investment spending, keeping real GDP on track for a second consecutive year of above-potential growth.”

“The largely positive Canadian economic outlook also explains why speculative net short positions on the loonie are now just a fraction of what they were back in January 2016.”