Heading into mid-week, the Canadian currency remains under significant pressure from falling oil prices. As has been the case for much of the recent weeks, the price of oil has held back the oil-correlated currency as the world faces an onslaught from the coronavirus outbreak. Being linked to risk has also done the Canadian dollar little favours as global risk sentiment remains at rock-bottom. Meanwhile, in the UK, the January unemployment figures were released yesterday. The report showed a rise in unemployment in the UK, which has worried investors as the report highlights a drop before the impact of the coronavirus has even had time to kick into the economic releases. Investors now worry for the next few months of employment data releases which reflect the unavoidable employer lay-offs caused by the disruption to normal business operation amid the coronavirus outbreak.
Canadian Dollar Pulled Down by Falling Oil Prices, Despite Momentary Stock Index Rise
On Tuesday, Canada’s main stock market index gained as optimism rose for policy stimulus to ease the coronavirus-induced economic pain, but the rally soon faltered as depreciating oil prices weighed on energy shares, tumbling the Canadian dollar to fresh four-year lows.
Canadian Prime Minister Justin Trudeau noted that his government would provide financial support to the Canadian people during the coronavirus outbreak, while Ontario, Canada’s most populous province, declared a state of emergency.
The Toronto Stock Exchange Composite Index closed 2.6% at 12,685.21, recovering from its lowest intraday level in four-years on Monday at 11,883.66. The index fell around 29% from its February 28 high. Gold stocks led the rally, climbing more than 13%, meanwhile the heavily weighted financial services sector was up nearly 2%. The energy group fell more than 9%, with Saudi Arabia and Russia keeping up their battle for market share. The price of oil, one of Canada’s major exports, settled down 6.1% at $26.95 a barrel.
GBP Sees Unemployment Rate Rise, Dragging Sterling Down
Meanwhile, in the UK, the January unemployment report was released on Tuesday. The report highlighted that the UK’s unemployment rate had rose for the month, which had investors worried. Not only was the news of a rise in unemployment a worry for the market, but the fact that the rise had occurred before the main chunk of the coronavirus panic began. The market now expects the upcoming month’s figures to be much worse now that a downward trend has already been witnessed in the UK economy before the coronavirus pushes its way into the picture.
Yesterday evening saw the UK’s Chancellor Rishi Sunak announce further stimulus and support packages for the UK in order to boost the economy and keep workers supported during the global time of uncertainty. The announcements helped GBP find some support as the market appreciated the actions taken by the UK government to protect the UK economy up ahead.
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