Pound to Canadian Dollar Exchange Rate Reaches 1-week high on Oil Price Outlook

January 12, 2015 - Written by James Fuller

STORY LINK Pound to Canadian Dollar Exchange Rate Reaches 1-week high on Oil Price Outlook

The Pound advanced to its best level in a week against the Canadian Dollar after Goldman Sachs slashed its outlook for oil prices and as crude oil prices declined to their lowest level in five years.

‘Producers are desperately hedging their production in a drastically falling market. They’re trying to lock in prices because they are convinced the market will stay down for a while,’ said a senior market analyst at the Price Futures Group.

Against the US Dollar the ‘Loonie’ tumbled to its lowest level in five years as demand for the US currency remained supported despite the release of disappointing wage growth data released in the previous session.

According to the Washington based Labour department, the US economy created 252,000 new jobs in the last month of 2014. Wage growth meanwhile fell by 0.2% and was only up by 1.7% on an annual basis.

The Canadian Dollar meanwhile was softened by official data released last week, which showed that the number of employed people in the North American nation fell unexpectedly by 4,300. Economists had been forecasting for an increase of 15,000.

The main drag on the Canadian currency however was another decline in oil prices, which tumbled to a fresh five-year low and news that Goldman Sachs has slashed its forecasts for prices.

"Our expectations are that the oil market could remain in a deep contango for about a year without hitting any significant storage constraints," Goldman Sachs analysts said. The bank said on Monday it had cut its 2015 forecast for Brent to $50.40 a barrel from $83.75 and reduced its 2015 WTI price forecast to $47.15 per barrel from $73.75. For 2016, Goldman Sachs sees Brent at $70 and WTI at $65, down from $90 and $80 respectively.

The Canadian Dollar is forecast to make further losses as the Organisation of Petroleum Exporting Countries (OPEC) shows no sign of cutting production to lessen a glut in supplies.

The U.A.E and Saudi Arabia have both said that they will not curb production no matter how low prices decline to.

Venezuela and Iran have pleaded to OPEC to slow production and allow prices to rise as both of their respective currencies are being negatively affected by the low prices.

An oil price sinking under $49 a barrel on Monday is twisting the knife in Venezuela's steadily shrinking economy and in sanctions-bound Iran.

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