by Michael Arbow MBA
Partner, RSD Solutions Inc.
I recall reading early last year about the positive correlation between oil prices and the strength of the Canadian dollar (CAD) or loonie against the US dollar (USD) and at that time the economist commented on how the relationship was breaking down. So I decided to see where things are today. Taking the most recent 10 year daily West Texas Intermediate (WTI) closing prices from the US Department of Energy and the corresponding 10 years of daily USD/CAD data from the Bank of Canada I ran a few simple correlations.
The results have been variable; with the ten year correlation being .91 and the last 12 months having the lowest correlation of the 1,3,5 and 10 year periods tested of .72. Interestingly for the past 6 months that relationship was .88. Switching gears slightly; from floor traders to the retired CEO of Royal Dutch Shell, all are projecting oil price increases in the coming year (2010 witnessed 7% with tepid global economic growth). Looks like it could be another good year for Canadians to visit Florida and a troublesome year for Canadian exporters pushing goods to the US.
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