CAD underperforms amid concerns over Venezuelan oil – ING

Canadian Dollar Faces Pressure Amid Oil Supply and Trade Deal Concerns

The Canadian Dollar (CAD) has recently become the weakest performer among G10 currencies, as investors react to the possibility of increased Venezuelan oil exports and lingering doubts over the renegotiation of the USMCA trade agreement, according to Francesco Pesole, a foreign exchange analyst at ING.

Heightened Risks for the Canadian Dollar

Since the weekend, CAD has lagged behind its G10 peers. The prospect of more Venezuelan oil entering the market poses a challenge for Canadian heavy crude, which had previously enjoyed a price advantage during Venezuela’s production shortfall. On Monday, the price gap between Western Canadian Select and WTI crude widened slightly, reflecting the commodities market’s cautious approach to these evolving geopolitical developments.

Pesole points out that the Canadian Dollar remains particularly exposed. Their short-term valuation model indicates that USD/CAD should be trading above 1.380. He also notes that investors may not be fully accounting for the economic risks tied to uncertainty over USMCA renegotiations, as well as the possibility that the Bank of Canada could implement another rate cut in 2026.

At present, ING continues to prefer other high-beta currencies such as the New Zealand Dollar (NZD), Swedish Krona (SEK), and Norwegian Krone (NOK) over the Canadian Dollar. The firm also sees potential for USD/CAD to approach the 1.390 level.