Pound to Canadian Dollar exchange rate stronger as oil prices fall

March 16, 2015 - Written by James Fuller

STORY LINK Pound to Canadian Dollar exchange rate stronger as oil prices fall

The Pound Sterling made solid gains against the Canadian Dollar after oil prices declined to as low as $44 per barrel and as market attention turns to the upcoming Federal Reserve policy meeting due to be held in the middle of the week. Oil lost declined by another two-thirds of a cent on Monday, with a prominent WTI contract trading down 64 cents to $44.22 a barrel. That is weighing on the Canadian Dollar, but it could prove to be good news for other things. The increase for oil could be enough, many experts say, to compel the Fed to start hiking rates sooner rather than later, to stave off the inflation that comes with a warming economy.

A lack of market moving economic data releases out of the UK saw the Pound Sterling trade in a tight range against many of its most traded peers. The fall in crude oil prices however was enough to weaken the ‘Loonie’ and allow the UK currency to advance.

Oil prices fell to its lowest level in 6-years as investors broadly shrugged off a report, which suggests that US oil production could begin to slow later in the year. Instead, the markets turned their attention to news that a deal to ease economic sanctions could be reached between the West and Iran. Such a move could see Iranian oil enter the already crowded oil market and send prices falling further.

‘Weakness hit the oil markets last week, and we expect it to continue. The arithmetic works out to a combined build in crude oil and refined products of approximately 200 million barrels in March-June. Any way you slice it, this is bearish for prices,’ said Michael Wittner, oil analyst at Societe Generale.

Against the Australian Dollar, the Canadian Dollar fell close to its lowest level in 2-weeks. Against the Japanese Yen and Euro, the currency weakened. If the ‘Loonie’ extend its downtrend, it is likely to find support around 0.99 against the ‘Aussie’, 1.28 against the ‘Greenback’, 93.50 against the Japanese Yen and 1.38 against the Euro

Further losses were restrained as official domestic data showed that foreign securities purchases rose by C$5.73 billion in January, exceeding expectations for an increase of C$3.74 billion. December's figure was revised to a C$13.54 billion drop from a previously estimated fall of C$13.55 billion.

Weaker oil prices are forecast to keep the ‘Loonie’ down against the Pound and other major peers.

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