The pound to Canadian dollar exchange rate retreated from 2018 highs on Tuesday, but the global coronavirus threat to the world’s economy and prospect of months-long oil price war could help the currency pairing retain an upside bias in the weeks ahead. The pound rose above the struggling CAD this week, which helped the GBP/CAD exchange rate pairing rise through one notable resistance barrier on the charts at the start of the week. Another barrier was tested, before a rebound in oil prices sent the exchange rate into retreat yesterday.
Oil Prices Threaten Cad as Volatility Expected for Months to Come
The Canadian dollar remains under heavy pressure from falling oil prices. As the nations primary export, Canada is set to suffer if the price of oil continues to dwindle. WTI crude oil futures rose 12% after the Russian government spokesperson Dmitry Peskov announced that Russia does not rule out a return to supply talks with the Organisation of Petroleum Exporting Countries (OPEC), although the next talks are not expected to occur until at least May. Russian Energy Minister Alexander Novak highlighted on Tuesday that recent oil price volatility is expected to continue for some months yet. This came a day after Russia’s decision not to endorse a supply reduction agreement led Saudi Arabia to declare a price wars which slumped futures prices by close to 30%.
Oil price concerns are set to cause more havoc for oil producing economies like CAD over the coming months. These economies will also have to deal with their own coronavirus threats in the near-future and predictions suggest that Canada’s economy could be amongst the hardest hit in another oil downturn, particularly if the global economy takes a turn for the worst at the same time.
GBP Likely to Edge Over Cad as Oil Prices and Coronavirus Retain Pressure on Canada
The pound to Canadian dollar exchange rate is likely to continue to rise if the price of oil remains volatile in the months ahead. Monday saw the GBP/CAD rate overcome the 1.75 handle as investors sold CAD following the days oil price crash. Persistent coronavirus concerns will only apply further pressure on oil prices, which will keep the Canadian dollar trading lower. In the weeks to come, the most important drivers of the GBP/CAD outlook will be the developments around the oil prices and the spread of coronavirus in North America and Europe, as well as the extent to which economies are disrupted by the containment efforts from governments across the world.
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