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Gains Forecast for Pound Sterling GBP vs Norwegian Krone NOK, Canadian Dollar CAD, as Oil Slumps

December 11, 2015 - Written by Frank Davies

'Risk-off' Trading Environment Provoked Global Stocks Volatility Today

Today’s session in the global FX markets has brought major movement for the leading global currencies.

Global share markets have plunged, with London’s benchmark FTSE 100 index shedding over 1.50% of its value on the session so far, while many of the euroland’s bourses have lost over 2.0% on the day so far.

Equities have opened up sharply lower on the other side of the Atlantic also, with the broad-ranging S&P 500 down by over 1.0% at the time of writing.

Weak Oil Price Futures Causes Commodity Prices to Decline Further

The decidedly ‘risk-off’ trading environment had dual triggers; many of Europe’s leading stock exchanges are heavily weighted toward oil & gas and mining companies, (e.g. BP PLC [LON : BP], Royal Dutch Shell [LON : RDSB], Rio Tinto [LON : RIO] and Anglo American [LON : AAL]) in London alone.

The continued drop in commodities prices, and in particular oil prices, has accelerated today, with the price of a barrel of crude dropping to a fresh 7-year low after the International Energy Agency (IEA) forecast a slowdown in growth in worldwide demand for oil in the short-to-medium term.

The comments from the widely-respected agency made venerable investment bank Goldman Sachs’ prediction that wholesale oil prices will fall to $25 per barrel a real possibility.

The prospect of such a move dragged down oil & gas shares as well as mining stocks and other sectors also suffered as investors desperately sought out safe havens for their investments. Meanwhile, the closely-monitored VIX ‘Fear Index’ spiked to above the 21.00 threshold, having been down in the 15.00s earlier in the week.

GBP to CAD, NOK Exchange Rates Predicted to Extend Gains as Bearish Crude Weighs on Commodity-Assets

In the currency markets, the Pound Sterling (currency : GBP) enjoyed strong support against both the Canadian Dollar (currency : CAD) and the Norwegian Krone (currency : NOK), both of which remain highly-correlated to oil prices.

Analysts forecast that there could be further gains to come for the GBP CAD and GBP NOK exchange rates, particularly given that the US Federal Reserve is expected to raise its headline interest rate for the first time in almost a decade next week.
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