The Canadian dollar traded lower on Monday as it fell to an eight-week low against the USD. CAD’s decline came after the price of oil drastically retreated and domestic data showed that factory activity increased at a snail’s pace for January. The price of oil is important to Canada as it is one of its major exports, the price was dragged down by the concerns over the coronavirus and the reduced demand that may occur because of it. Meanwhile, GBP also retreated on last weeks gains as Brexit negotiations were initiated and the possibly of a no-deal Brexit came to light once more.
Canadian Dollar Falls as Oil Prices Drop and Economic Data Disappoints
The Canadian dollar suffered at the hands of falling oil prices and poor economic data on Monday which saw the currency trade lower. The price of oil, which is one of Canada’s biggest exports, has been dragged down amid concerns that the coronavirus outbreak may reduce the demand for oil. US crude oil futures were down 1.1% yesterday at $50.99 a barrel. Fears of the spread of the virus have dominated the headlines in recent weeks as the disease has now reached Europe. Scientists in China have noted that they believe that the virus may be under control and that the peak of the disease is expected to arrive in 10-14 days, after which the decline of cases should begin which may lend some support to the global market.
Meanwhile, the Canadian dollar has also fell under the pressure of poor economic data in the form of the IHS Markit Canada Manufacturing Purchasing Manager’ index (PMI), which is a measure of manufacturing business conditions. The index rose to 50.6 in January from 50.4 in December. The reading showed growth as the figure was above the 50-point threshold, but with only a 0.2% growth the market was not thrilled with the number. Canada expects its trade data for December on Wednesday and January jobs data at the end of the week. Both could lend a helping hand to the Bank of Canada’s policy outlook.
GBP Drops as EU-UK Negotiations Open the Door to a No-Deal Brexit Once More
Monday saw the start of the EU-UK trade deal negotiations. Both parties laid out their initial plans to bring to the negotiating table. The UK government re-iterated that it will not look to abide by EU rules to smooth over the trade talks which suggested to the market that the negotiations will not be an easy process. This once more opened the worries of a no-deal Brexit occurrence, something that investors want to stay well away from. As a result, GBP saw a drop in support despite last week’s BoE interest rate decision which allowed it to gain on many of its rival currencies. The unfolding’s of the Brexit negotiations will likely take centre stage for GBP and will dictate its movements in the currency market up ahead.
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