Pound Canadian Dollar (GBP/CAD) Exchange Rate Rallies as Oil Demand to Plummet to Decade Low

March 9, 2020 - Written by John Cameron

STORY LINK Pound Canadian Dollar (GBP/CAD) Exchange Rate Rallies as Oil Demand to Plummet to Decade Low

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as Oil Prices Slump by 30%

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rallied today, jumping by around 2%. This left the pairing trading at around CA$1.7866.

Today's largest moves were linked to moves in oil prices, which sent the oil-sensitive ‘Loonie’ lower against a handful of currencies.

Oil prices plummeted by around 30% after Saudi Arabia shocked markets by pledging to cut oil prices and boost production after the collapse of an OPEC supply agreement.

Global oil demand is set to fall in 2020 for the first time in over a decade due to the spread of Covid-19 weighing on CAD.

Commenting on oil prices, IEA Executive Director Fatih Birol said in a statement:

‘The coronavirus crisis is affecting a wide range of energy markets - including coal, gas and renewables - but its impact on oil markets is particularly severe because it is stopping people and goods from moving around.

‘The coronavirus crisis is adding to uncertainties the global oil industry faces as it contemplates new investments and business strategies.’

Sterling (GBP) Rallies on as Investors Flock to Safer Assets

The Pound received a boost on Monday as riskier currencies linked to oil slumped, while investors headed for safer assets like Sterling.

Covid-19 fears and Saudi Arabia’s shock decision sent oil prices lower, allowing the Pound to rally against the Canadian Dollar.

Markets were also spooked by Italy’s mass quarantine, with up to 16 million people in northern Italy now needing permission for any travel.

According to ING analysts, today’s set up is a ‘perfect storm’ for currency markets. They also added:

‘Financial markets have suffered a rude awakening to notions that volatility was a thing of the past. We’re now seeing the kind of market dislocation not witnessed since the 2008-09 global financial crisis.

‘This all conspires to deliver an extreme flight to safety, into the likes of the JPY [Japanese Yen] and the CHF [Swiss Franc].’

Meanwhile, due to the lack of UK data, markets are focused on Chancellor Rishi Sunak’s Spring Budget later this week. Many expect he will announce measures to help support the economy in the wake of the Covid-19 outbreak.

Pound Canadian Dollar Outlook: Will Oil Prices Slide Further?

Looking ahead to this afternoon, the Canadian Dollar (CAD) could continue to slide against the Pound (GBP) if oil prices continue to decline.

If oil prices continue to fall, the risk-sensitive ‘Loonie’ will suffer further declines against the Pound.

Meanwhile, upbeat British like-for-like retail sales could provide Sterling with a slight upswing of support tomorrow.

If the British Retail Consortium (BRC) reveal that sales have jumped higher than expected in February, rebounding from January’s figure, the Pound Canadian Dollar (GBP/CAD) exchange rate will extend today's gains.

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TAGS: Pound Canadian Dollar Forecasts