Pound to Canadian Dollar Exchange Rate Weaker as oil prices rise

April 20, 2015 - Written by Ben Hughes

STORY LINK Pound to Canadian Dollar Exchange Rate Weaker as oil prices rise

Pound to Canadian Dollar Exchange Rate Weaker as oil prices rise

The Pound Sterling to Canadian Dollar softened at the start of the week as rising oil prices supported the commodity based Canadian currency. A lack of domestic market moving economic data out of the UK also put pressure on the Pound and left the currency vulnerable to events elsewhere. Political uncertainty over the outcome of the May 7 general election is also set to weigh upon the Pound over the coming sessions. With the outcome of the vote far from certain, the uncertainty is expected to drag the Pound lower.
Oil prices continued to rally as concerns over the violence in the Middle East combined with news that the Chinese Central Bank introduced more stimulus measures and a report, which showed that the number of oilrigs active in the USA fell to the lowest amount since November 2010.

Middle East Flashpoint

Fears that the situation in Yemen could escalate into a full-scale war between Iran and Saudi Arabia were heightened over the weekend after the USA claimed that an Iranian convoy was heading for the port city of Aden, which is being blockaded by Saudi Arabian warships. An incident in the region could spark a wider conflict as Pakistan and Egypt have promised to back up Saudi Arabia if its forces come under attack.

Over the weekend, China announced the biggest cut to the amount of cash lenders must set aside as reserves since the global financial crisis. The move came following last week’s Chinese data releases, which showed that the world’s second largest economy is on track to miss its 7% growth target.

‘The cut to reserve requirements in China is seen as a clear stimulus. Oil markets are reacting to that quite strongly. Rig reductions and a modest pullback in production in the US are certainly helping the scenario,’ said Michael McCarthy, chief strategist at CMC Markets.

US oilrig count falls

According to oilfield Service Company, Baker Hughes, the number of active US drilling rigs in service dropped by 26 last week to 734. The report means that the number of rigs has declined by 53% since December last year as oil prices declined. A separate report by the US Energy Information Administration showed that production slid to 9.38 million barrels per day in April.

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The Canadian Dollar could make further gains against the Pound Sterling if Bank of Canada Governor Stephen Poloz delivers a hawkish speech later in the session.

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