In a recent report from IHS Markit, there was a marked increase in prices of WTI crude oil and the US dollar against the euro. This trend continues, and if the trend does not turn around soon, we may see an increase in the dollar against the euro and a drop in the dollar against the Canadian dollar.
As WTI crude prices climbed and touched a new daily high of $ 40 a barrel, the U.S. dollar rose a few cents per currency. When the value of one currency goes up against another, the other currency has to go down to maintain the correlation. For now, the Canadian dollar is down. But soon this trend could be reversed as WTI prices rose.
If the price of both Canadian crude oil futures starts to fall and the Canadian dollar strengthens against the US dollar, this could lead to a trade war with the United States. This is very bad for the United States, as the American dollar is stronger than the Canadian dollar, meaning we will lose our biggest exports. Canada is the second largest export market for the United States and that means we have a huge trade deficit. This is not a good thing for us, and it shouldn’t be a surprise that many people worry about it.
As WTI reached new highs, the Canadian dollar remained weak against the euro and the dollar weakened against the Mexican peso. This means that the US dollar remains strong against the Canadian dollar and maintains its position against all major world currencies in order to protect the American economy and the reserves of the American dollar.
Many are concerned that the price of WTI crude oil will move further and it will drive gasoline prices higher. With all the luck and good timing, many people can expect this to happen and they might make a terrible mistake when it comes to their fuel prices.
As long as the US dollar remains strong, there is no reason for a trade war between the United States and Canada. That means everyone wins. For now, we expect this to continue until WTI crude prices begin to climb again.