Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Oil Suffers Biggest Weekly Losses Since 1986
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate advanced by +0.49% in the early part of Friday’s European trading as oil headed for its largest weekly losing streak on record since March 1986.
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The Organisation of the Petroleum Exporting Countries (OPEC) recently announced that it wouldn’t be cutting oil production despite a global glut causing a price collapse. However, non-OPEC members have taken the matter into their own hands and said that the rate in which they increase output will be slower than previously forecast.
Oil analyst Amrita Sen stated: ‘The market is very over-sold and has been looking for signs of a pick-up. The IEA [International Energy Agency] has very clearly come out and said there will be an impact from price. They’ve lowered Canada, Colombia production-wise, they’ve talked about shale as well.’
Canada’s largest export is oil, meaning the relationship between oil prices and the Canadian Dollar is extremely sensitive. Crude oil has fallen by almost 60% in the last six months—a factor that’s pressured the ‘Loonie’ lower and threatened the Canadian economic recovery.
The IEA stated: ‘How low the market’s floor will be is anybody’s guess. But the sell-off is having an impact. A price recovery – baring any major disruption – may not be imminent, but signs are mounting that the tide will turn.’
The IEA expects lower prices will gradually restrain output and therefore increase demand for crude.
The IEA report continued: ‘The most tangible price effects are on the supply front. Upstream spending plans have been the first casualty of the market’s rout. Companies have been taking an axe to their budgets, postponing or cancelling new projects, while trying to squeeze the most out of producing fields.’
In addition, Canadian Existing Home Sales contracted in December and placed further downward pressure on the Canadian Dollar exchange rate.
The ecostat showed home sales retreated by -5.8% in December, encouraged by a massive 25% downtrend in regions which are focal points for oil, such as Alberta, Calgary and Edmonton.
CREA chief economist Gregory Klump stated: ‘Given the uncertain outlook for oil prices, it’s no surprise consumer confidence in Alberta softened and moved some home buyers to the sidelines.’
‘December sales were down from the previous month in a number of Canada’s largest and most active housing markets, indicating a broadly based cooling off for Canadian home sales as 2014 came to an end.’
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is likely to fluctuate on global developments on Friday, with no domestic data for either the UK or Canada scheduled for release. Furthermore, the Price of oil is likely to keep the ‘Loonie’ trending lower against other majors.
Looking ahead to next week, Wednesday will see the publication of UK Employment Change and Unemployment Rate figures, as well as the Bank of England (BoE) meeting minutes.
Any hawkish tones from the minutes could see the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate gain, while any dovish tones could lend favour to the ‘Loonie’.
Canadian Consumer Price Index (CPI) figures will be out on Friday and could pose more problems for the ‘Loonie’ if inflation has declined significantly.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is trending in the region of 1.8229. The Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate resides at 0.5489.