- Oil price surge carries CAD higher on Tuesday

- More gains possible says ING's Pesole

- Investor sentiment boosted by news of successful covid-19 treatment

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The Canadian Dollar is being tipped to maintain a bullish tone over coming weeks by analysts at a leading investment bank, who observe the fundamentals underpinning the currency continue to improve.

According to ING Bank's foreign exchange research department, the Canadian Dollar can advance further against the U.S. Dollar and other peers as oil prices improve and global investor sentiment continues to improve.

"The loonie appears to have a more attractive risk-reward profile than other commodity currencies in the G10, as the recent astonishing rebound in employment and more sustainable oil prices for Canadian producers suggests fundamentals for the currency have likely improved," says Francesco Pesole, FX Strategist at ING.

The call comes as the Canadian Dollar leads its developed economy peers, advancing against all but one G10 currency - the Norwegian Krone - on Tuesday, June 16.

That Norway's Krone is leading the pack tells a story, as like the Canadian Dollar it is an oil-linked currency.

Oil prices are surging by over 4% at the time of writing, driven by a cocktail of developments that have confirmed to investors that the recovery in financial assets and economies has further to run as the fear of a major second covid-19 outbreak in the U.S. fades.

The Pound-to-Canadian Dollar traded 0.12% lower on the day at 1.7077, the Euro-to-Canadian Dollar was 0.70% lower at 1.5260 while the U.S. Dollar-to-Canadian Dollar was flat at 1.3570.

Above: Short-term GBP/CAD chart showing decline in response to broader rally in the Canadian Dollar.

Investor sentiment was boosted on confirmation that a British covid-19 treatment trial had yielded positive results that saw a significantly lower mortality rate for those with a serious infection.

Dexamethasone - which has been around for 60 years - reduced deaths by a third among patients on ventilators and by a fifth of those receiving oxygen only.

"This is the most important trial result for COVID-19 so far. Significant reduction in mortality in those requiring oxygen or ventilation from a widely available, safe and well known drug. Many thanks to those who took part and made it happen. It will save lives around the world," says Professor Chris Whitty, England's Chief Medical Officer.

Global stock markets pushed higher amidst the news, with the Dow Jones and S&P 500 trading 2.0% higher while in Europe the FTSE 100 and DAX 30 going 3.0% higher.

ING's Pesole says that if risk sentiment continues to improve the Canadian Dollar can be expected "to be at the forefront of the G10 scorecard, barring major setbacks in crude prices".

ING are forecasting USD/CAD at 1.3300 in one month, down from the 1.3523 quoted at the time of writing.

"Strong gains for stocks and a mini rebound in crude oil prices suggest that CAD has some catching up to do with broader market developments," says Shaun Osborne at Scotiabank.

Scotiabank note that after a brief dip, the Canadian Dollar's positive correlation with the

S&P 500 has strengthened again over the past week.

"Risk appetite remains the key driver for the CAD at present but with lockdowns ending, markets will soon start to pay more attention to high frequency data to assess how quickly economies are coming back on stream," says Osborne.

The CAD-supportive fundamental backdrop is meanwhile supported by the technical market setup which advocates for further gains according to a number of analysts.

"The USD’s late week rebound last week has seen little additional follow through this week. Gains were capped at the 21-day MA yesterday in relatively categorical terms on the intraday chart and the USD is struggling to maintain gains seen through late morning European trade to the 1.36 area (hourly charts suggest a bearish reversal has developed, in fact)," says Scotiabank's Osborne.

Scotiabank are looking for USD/CAD to pressure the 1.35 area, "losses could pick up materially below 1.3500/10".