The Australian Dollar to Canadian Dollar (AUD/CAD) exchange rate advanced in the early hours of the North American session as investors adjusted their bets for a Reserve Bank of Australia (RBA) rate cut.
In addition, the Canadian Dollar has been softer in recent months as the price of oil continues to tumble. However, oil prices jumped by as much as 3% on Tuesday as the US Dollar fell, offering some support to weaker commodities.
However, supply isn’t diminishing and a global glut continues to weigh on commodity currencies such as the Canadian Dollar.
Industry expert Andrew Lipow commented: ‘Given the expectations in supply, it’s kind of surprising to see the market pop this much today. There’s probably some short-covering after the extended selloff we’ve had for weeks now, but I don’t think fundamentally anything’s changed.’
It was thought that Saudi Arabia’s new king may adjust production to help increase prices, but that hope has gone out the window.
Instead, Saudi Arabia has increased its oil output in an attempt to beat the US shale oil prices lower.
Saudi Arabian oil representative Khalid al-Falih commented: ‘Supply and demand and the rules of economics will govern. It will take time for the current glut to be removed.’
The Organisation of Petroleum Exporting Countries (OPEC) has suggested that oil prices will climb despite high production.
OPEC secretary general Abdalla Salem ed-Badri stated: ‘If we cut production then there will be spare capacity and producers will not invest, or postpone projects. The market will rebound back higher than the $147 we saw in 2008.’
Meanwhile, Australian inflation ecostats offered the ‘Aussie’ some support amid speculation that the Reserve Bank of Australia (RBA) may cut rates.
Inflation fell from 2.3% to 1.7% and economists’ project that softer consumer price gains and a lower ‘Aussie’ may eliminate the need for borrowing costs to be revised.
Industry expert Stephen Walters said of the situation stating: ‘I think there’s scope there if the Reserve Bank thinks there’s a need to cut the cash rate. But we don’t think that’s likely in the near term, partly because petrol prices have come down pretty sharply. Now that’s having a very similar impact to what interest rate cuts would. It frees up disposable income for spending on other purchases.’
The Australian Dollar to Canadian Dollar exchange rate is likely to fluctuate significantly on Friday with the release of Canadian Gross Domestic Product (GDP) ecostats.
At present, it is thought growth in the North American nation may decline in November on the year from 2.3% to 2.1%.
The Australian Dollar to Canadian Dollar (AUD/CAD) exchange rate presently resides at 0.9906.
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