USD/CAD intermarket: Oil fails to boost loonie

USD/CAD is trading modestly higher on Monday but moved off session highs. Earlier it peaked at 1.3092 and currently it trades at 1.3050/55. The pair erased most of the gains as crude oil prices rose.

Cad down in the month despite oil prices rally

The correlation with oil prices during May it has not been as strong as today. From the level it had at the beginning of the month, the WTI barrel is up 8% while USD/CAD is also up, but by almost 4%.

Actually, USD/CAD moved it the same direction as oil. The usual negative correlation was broken affected by a stronger US dollar in the market amid a dramatic change in Federal Reserve rate hike expectations that started to rise early in May and then jumped after FOMC minutes and also last Friday, after Janet Yellen speech.

The pair made a reversal early in May, recovering from multi-month lows, ending a 100-day rally of the loonie. US and Canadian bond yields -10y- moved in the same direction during the period, keeping the spread relatively steady.