Pound to Canadian Dollar Exchange Rate Firmer as Oil Falls and confidence falls

December 23, 2014 - Written by Tim Boyer

STORY LINK Pound to Canadian Dollar Exchange Rate Firmer as Oil Falls and confidence falls

The Pound to Canadian Dollar exchange rate firmed as crude oil prices extended a fourth weekly decline and as a Canadian consumer confidence report compiled by Bloomberg made its third consecutive decline.

Trading volumes will be light this week due to a fall in the number of market participants as many traders and investors headed off on their Christmas and New Year holidays. Despite that, the Pound made gains against the ‘Loonie’.

Crude oil prices fell after briefly rallying to extend a fourth weekly decline on concern that OPEC’S refusal to curb production will make the situation worse. Oil is Canada’s most exported commodity and prices have tumbled in recent months due to an oversupply.

Saudi Arabia’s oil minister Ali al-Naimi convinced other OPEC members that it is not in the group’s interests to cut oil production despite tumbling prices.

‘As a policy for OPEC, and I convinced OPEC of this, even Mr al-Badri (OPEC’s secretary general) is now convinced, it is not in the interest of OPEC producers to cut their production, whatever the price is,’ Naimi said.

Also weighing on the Canadian Dollar was the release of the Bloomberg compiled Nanos Canadian Confidence Index. With a lack of activity in the markets and a scarcity of economic data releases, the Bloomberg data was considered market moving.

The index fell to a reading of 56.2 in the week ending on December 19. It was the third straight decline and was the lowest figure recorded since February 7. Falling oil prices have led to growing pessimism over most sectors of the Canadian economy.

The Canadian dollar also remained under pressure from data released last week, which showed that Canada's consumer price inflation (CPI) fell by 0.4% in November, confounding expectations for a 0.1% downtick, after a 0.1% rise in October.

With not much in the way of data this week, the main event will occur on Tuesday with the publication of UK and Canadian GDP data.

‘The Canadian Dollar is likely to trade with a high correlation to oil prices, as well as fall victim to any end of year positioning,’ said Camilla Sutton, the chief foreign exchange strategist and managing director of Scotiabank Global Banking and Markets.

After Tuesday, trade is expected to extremely muted and many financial markets will be closed on Thursday and Friday for the Christmas and Boxing Day bank holidays.

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