The Canadian dollar is struggling to navigate the latest omicron wave mixed in with rising commodity prices. It's left the pair in the middle of the range over the past six weeks with the bottom at 1.2600 and top at 1.2950.
With all the lockdowns in Canada at the moment, Q1 is looking very soft and likely negative. The Bank of Canada is going to have to wrestle with that in the months ahead and it could keep them sidelined.
What's especially difficult for the BOC is that we saw strong housing numbers yesterday as that bubble continues to inflate. For the BOC, they might hike sooner in order to stem the rising tide in home prices, even if the economy is sluggish.
Along with that, the case for commodities is strengthening as oil prices rise back above $80. Today's trade data showed the best Canadian exports since 2006.
Mixed in is a volatile risk market. Sentiment has been good for weeks but the loonie hasn't responded. If we start to see wider signs of a global growth disappointment, the loonie is vulnerable.
At the end of the day, CAD is more of a trade on global growth than anything uniquely domestic.
