The Canadian dollar remained under pressure on Tuesday, falling short or remaining flat against its rival currencies. The oil-sensitive CAD felt the pressure as oil prices rebounded after OPEC signalled a potential curb on production to protect oil prices as Chinese demand subsides. As a result, the Canadian Dollar traded flat at around the $0.7527 against the USD. Optimism lingered in hope that OPEC would be able to offset a potential drop in demand caused by the outbreak of the coronavirus in China, this buoyed prices. Increased fears of the disease weighed on crude prices, which sent them to the lowest they have been in over a year. Meanwhile, GBP steadied a little on Tuesday after a few days of sharp declines. But the outlook for GBP still remains heavy as the Brexit road to December looks like showing no signs of easing up for the UK-EU negotiations.
Canadian Dollar Under Pressure From Falling Oil Prices
The Canadian dollar is heavily reliant on the price of oil for its economic success. As one of the country’s biggest exports, the falling price of oil due to the outbreak of the coronavirus has affected the Canadian economy. BP’s CFO, Brian Gilvary estimated that the slowdown caused by the outbreak could reduce oil consumption by 300,000 to 500,000 barrels per day which equates to around 0.5% of global demand. There are hopes that price cuts from OPEC will help re-balance the market and sweep up any excess of supply.
Canada’s employment data disappoints and adds weight to the currency
Monday’s Markit manufacturing PMI for Canada saw subdued conditions at the start of 2020 as January’s PMI registered in at 50.6 from December’s four month low of 50.4. Canadian exchange rates did not marvel over these figures and saw the currency face further pressure as data showed employment within the sector fell for the first time since April 2019.
GBP Steadies but Faces Tough Road Ahead With Brexit Negotiations
This week also marked the start of the UK’s Brexit negotiations with the EU. Both parties laid out their agendas on Monday, which went against GBP as markets once again feared about the possibility of a no-deal Brexit following the UK’s demands in the opening discussion. The UK will look to achieve a trade deal similar to that of Canada or Australia. Some investors have become concerned that the UK’s stubborn stance on what it sets out to achieve could backfire and leave them without a deal in December. As a result, GBP fell, but it now appears to have steadied as the market awaits further developments in the Brexit saga.
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