Disruptions of oil supply from different regions of the world, as well as reduction in oil inventories in the US warehouses, have provoked recent growth in oil prices. The price of crude oil Brent has reached new annual highs at the level of $52.80 per barrel in June. International energy Agency (IEA) has reported today that oil production outside OPEC in May fell by over 650.000 barrels per day due to the fires in Canada. The decline of the global supply of oil in May was the strongest since the beginning of 2013.
May month was marked by rise in the USD. However, since the beginning of June the decline in the USD has resumed, including the USD/CAD.
The rise in oil prices supports the rise in the Canadian currency. Crude oil is an important source of export revenue for Canada and oil prices are correlated with the prices of the Canadian dollar. According to IEA, global oil demand in 2016 and 2017 will increase by 1.3 million barrels a day, and this should support crude oil prices, which will have a positively impact on the Canadian dollar.
On Wednesday (16:30 GMT 2) US Department of Energy will release official data on the US oil inventories. Oil reserves in the United States remains to be by 33% higher than the five year average, being close to the highs since 1930. The price of oil may also go down after the end of the active season of road trips in the US. The decline in oil prices will almost inevitably provoke the decline price of the Canadian dollar.
Earlier, the Bank of Canada left interest rate at the level of 0.5% and raised its forecast for economic growth in Canada by 2016. The meetings of the major Central world banks will be held this week, where the banks of USA, UK and Japan will make their interest rate decisions. Canadian macro-economic statistics of this week will include inflation data, consumer price index (CPI) on Friday (14:30 GMT 2). It is expected that the index will growth by 0.5% in May ( 1.6% on annual basis). If the forecast proves to be correct, the Canadian dollar will strengthen and Vice versa.
The US Fed's decision on rates may also support the Canadian currency, since, according to most market participants, the Fed is unlikely to raise interest rates in June.