Canadian dollar outlook weakened after reported U.S.-Venezuela incident

U.S. forces were reported to have attacked Venezuela and detained President Nicolás Maduro, and the Canadian dollar fell about 0.7% as oil prices softened and concerns rose about heavy crude displacement.

U.S. forces were reported to have attacked Venezuela and detained President Nicolás Maduro. The event has coincided with a weakening of the Canadian dollar and renewed focus on oil market dynamics. Economists had expected the loonie to start the year near 72.5 U.S. cents and strengthen toward roughly 74 to 76 U.S. cents by year-end. Instead, the currency was reported down about 0.7% and was nearing a fall below 72 U.S. cents. Key points: - U.S. forces were reported to have attacked Venezuela and detained President Nicolás Maduro. - The Canadian dollar was reported down about 0.7% and was nearing a fall below 72 U.S. cents, its weakest since early December. - West Texas Intermediate (WTI) was trading around US$57 a barrel and fell about 20% last year; Western Canadian Select (WCS) declined about 25% last year amid an oil surplus estimated at 2–3 million barrels per day. - Karl Schamotta, chief market strategist at Corpay Inc., said lower oil prices have acted as a headwind for the Canadian dollar and could limit energy-sector investment in Canada. - Charles St-Arnaud, chief economist at Servus Credit Union Ltd., said a 10% reduction in Albertan oil exports to the U.S. would be estimated to cost about $13 billion and reduce Alberta’s GDP by about 3%. Summary: The reported U.S.-Venezuela incident has coincided with softer oil prices and a pullback in the Canadian dollar, which strategists say could limit energy investment and weigh on Canadian growth. Undetermined at this time.