Forex analyst Gary Howes predicts that the Canadian Dollar (CAD, Financial) might rise if tensions in the Middle East intensify. Following a missile attack by Iran, Israel is considering a significant retaliation against Iran's oil infrastructure. This potential escalation could lead to a substantial increase in crude oil prices, positively affecting oil-related assets like the CAD.
Israeli officials are deliberating a major response to Iran's recent large-scale missile strikes, which could target oil production facilities and strategic bases within Iran. Forex strategist Francesco Pesole from ING suggests that a rapid escalation of Middle Eastern tensions will result in rising oil prices, subsequently impacting the USD/CAD exchange rate as high-beta currencies like the CAD take a dip against the USD.
Despite not being a traditional haven during geopolitical tensions, the CAD shows a tendency to follow the performance of North American currencies against the GBP, EUR, and others. Pesole notes that oil prices are a direct factor influencing CAD demand. He explains that amidst rising geopolitical tensions, both the USD and CAD tend to increase due to oil price hikes and moves in safe-haven currencies like the CHF and NZD.
This escalation in Middle Eastern conflicts may provide a short-term opportunity for the CAD and oil prices to outperform. As of the latest data, the USD/CAD exchange rate was reported at 1.3511/13.
