USD/CAD pushes higher as brent crude extends decline to $3

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USD/CAD pushes higher as brent crude extends decline to $3

The commodity currencies are in an interesting spot right now.

The US dollar is falling on a few fronts because the market is re-thinking the path of Fed funds. But they're re-thinking it due to slower growth and inflation.

Rates are also relatively high in the commodity block, currently at:

• 4.50% in Canada
• 4.35% in Australia
• 5.50% in New Zealand

The question is: If the Fed begins cutting aggressively, will those other central banks match them cut-for-cut?

In the case of Canada, I think that argument is particularly compelling. Rates are biting hard in Canada and the housing market is floundering; the BOC has already lowered rates by 50 bps and I could see the case for getting to 2% in a hurry.

There are also the knock-on effects to things like commodity and today's $3 drop in brent crude highlights risks for commodity producers.

Right now, USD/CAD is getting caught in the USD-crosswinds. I think as that dust settles and the worries about the global economy catalyze, expect the dollar to be a safe haven (along with JPY and CHF).

It gets even-more compelling when you look at the USD/CAD chart because the pair could break a trio of highs over the past two years, clearing the way to 1.40 and beyond.

                This article was written by Adam Button at www.forexlive.com.

Source: USD/CAD pushes higher as brent crude extends decline to $3

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