Are forex markets affected by oil prices?
Crude oil prices are soaring to YTD highs this week, due in part to production cuts overseas. Prices reached $94 a barrel midweek before dropping slightly.
While foreign exchange markets do not have any direct ties to a commodity like crude oil, in the past there have been correlations in price action. Historically, Canadian dollar has been positively correlated to oil – primarily because crude oil production serves as a major component of Canadian GDP.
CAD’s relationship with crude oil may provide justification for recent prices in USD/CAD. Across many major currency pairs, dollar has been outperforming. Against Canadian dollar, however, USD finds itself near the midpoint of its 2023 price range. Trading near 1.3500, USD/CAD has been as high as 1.3800 and as low as 1.3100 this year.
www.ig.com