Weaker Oil price weighs on Loonie

In spite of a bumper start of the week for commodity currencies against Dollar, Canadian currency isn't doing so well and all blame lies with the oil.

After global financial crisis of 2008/09, loonie sharply snapped up its loss against Dollar and ruled till 2013 and even first half of 2014, as oil price held its head above $100 mark. This led Canada to classic Dutch disease, where heavy inflows into one sector led to appreciation in Loonie and destruction in other sector.

Canada has been running large trade imbalance since financial crisis of 2008/09 in sector which was covered up by large revenue in oil till 2014 but as oil price dropped more than 60% since summer of 2014, gap in trade is larger than ever.

Recent weakness in US economy, Canada's largest neighbor and trading partner has contributed to souring Loonie.

Focus is now on FED's monetary policy decision and guidance tomorrow along with oil. WTI Oil after rising beyond $50/barrel is back challenging key support level around $43/barrel, breaking which oil might deteriorate to 2008/09 low.

Canadian Dollar is currently trading at 1.319 per Dollar.