In another week dominated by coronavirus news headlines, the Canadian dollar fared worse once more against the pound as falling oil prices kept the oil-sensitive currency under severe pressure. With Saudi Arabia launching an oil price war with Russia; selling oil at bottom rates in order to capture the market as global demand falls amidst the coronavirus crisis.
Meanwhile, for the pound, investors were disappointed in the UK government’s lack of action last week concerning the coronavirus containment efforts. Towards the end of the week, the UK Prime Minister Boris Johnson called an emergency Cobra meeting which saw the containment level switch to the ‘delay’ phase. Many in the market had expected the UK to follow suit with most nearby nations in closing schools and airports, but the lacklustre response saw GBP fall. GBP is likely to perform based on the government’s actions in the upcoming week; a move for stricter measures could see sterling rise, while economic data could also provide a welcome lift through the week.
Sinking oil prices hurt CAD
Last week saw an unsuccessful meeting between members of OPEC+. The meeting’s aim was to discuss and come to an agreement over the reduction of oil output in a measure to combat the damage of the coronavirus. As a result of the unsuccessful negotiations, Saudi Arabia noted that it would up its output and dropped its rates to bottom prices in order to seize the market as the demand for oil continues to fail because of the virus. The battle on the oil fields saw the Canadian dollar opening the week on the back foot as oil prices hovered around $30 a barrel. However, CAD managed to claw back some losses against GBP as oil prices rallied over 7% towards the second half of the week. But these gains were somewhat limited by the news that the Canadian Prime Minister Justin Trudeau was himself self-isolating following his wife testing positive for the disease after a trip to the UK.
Coronavirus to remain in spotlight for upcoming week
We can expect the coronavirus to remain dominant in the headlines for the upcoming week. Should oil prices take any further hits, CAD is likely to drop further. Canada’s upcoming consumer price index (CPI) will swing the currency as expectations predict a drop in domestic inflation which could hurt CAD. Meanwhile in the UK, investors will be hoping the government steps up its approach to the containment of the virus. If fears rise over the governments lack of action, GBP could suffer.
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