Crude oil correlations to forex pairs

Are forex markets affected by oil prices?

Crude oil prices are soaring to YTD highs this week, due in part to production cuts overseas. Prices reached $94 a barrel midweek before dropping slightly.

While foreign exchange markets do not have any direct ties to a commodity like crude oil, in the past there have been correlations in price action. Historically, Canadian dollar has been positively correlated to oil – primarily because crude oil production serves as a major component of Canadian GDP.

CAD’s relationship with crude oil may provide justification for recent prices in USD/CAD. Across many major currency pairs, dollar has been outperforming. Against Canadian dollar, however, USD finds itself near the midpoint of its 2023 price range. Trading near 1.3500, USD/CAD has been as high as 1.3800 and as low as 1.3100 this year.

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