With the Russo-Ukrainian conflict pushing the price of crude oil nearly two-fold from its lows in mid-December, the Bank of Canada has lost a vital tool – a stronger currency – against inflation, according to a Reuters analysis.
An unexpected consequence of the Russian invasion and the resulting oil crisis is the Canadian dollar’s apparent decoupling from its traditional commodity partner, said strategists polled by Reuters.
“The era of ‘drill, baby drill’ is over in America, as well as in Canada.
Environmental opposition to new fossil fuel projects and the Canadian government’s plans to cap carbon emissions are also deterring growth.
We would probably be in a situation here where the Bank [of Canada] would not be pushing back against the idea of a stronger Canadian dollar.”
And while the loonie is expected to ride the crest of higher energy prices for the rest of 2022, this will come about not due to greater investment, but as a result of Canada adjusting its export-import price ratio accordingly, Reuters analysts said.
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