Pound Canadian Dollar (GBP/CAD) Exchange Rate Rises as Coronavirus Throttles Oil Demand

February 10, 2020 – Written by John Cameron

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Edges Higher as Oil Prices Fall

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate edged higher this afternoon, leaving the pairing trading at around CA$ 1.7209.

The oil-sensitive ‘Loonie’ slumped after oil prices slipped at the start of the week as Chinese demand weakened amidst the Wuhan coronavirus outbreak.

Since a peak in January, oil slumped more than 20% as demand throttled the world’s largest oil importer.

Commenting on this, Ole Hanson, Saxo Bank commodity strategist noted:

‘The concern remains that the wider markets have yet to reflect the full impact of the disruption. With China being the world’s most dominant consumer of raw materials, the impact continues to be felt strongly across key commodities and the world is facing the biggest demand shock since the 2009 global financial crisis.’

Prices also remained under pressure after Russia stated it needed more time to decide whether or not to cut production by a further 600,000 barrels per day.

Russia’s Energy Minister, Alexander Novak argued that US crude production would slow and global oil demand still remained solid.

Commenting on this, Harry Tchilinguirian, BNP Paribas analyst said:

‘The oil market will be waiting on Russia’s response, to see if the OPEC+ can prove itself as being a proactive producer group in dealing the coronavirus virus outbreak which, like SARS, is effectively a negative demand shock.’

CAD Slides despite Canadian Construction Rising to Four-Month High

The Canadian Dollar weakened on Monday, hitting a four-month low against the US Dollar (USD) as Wuhan virus worries overshadowed upbeat Canadian housing statistics.

Building rebounded at the start of 2020, with the level of construction jumping to a four-month high after a slowdown at the end of 2019.

The number of Canadian units rose by 8.8% from 195,892 in December.

In a separate measure of data, stronger-than-expected Canadian permits jumped by 7.4% in December, however, this was offset by lower risk appetite.

As the country is a major exporter of commodities, a slowdown in global growth caused by the outbreak of the virus would hurt its economy.

Sterling (GBP) Rises despite Lack of Data

The Pound was able to rise against the Canadian Dollar despite there being little data or news to drive the British currency.

GBP rose against the Canadian Dollar over the course of this morning despite UK-EU trade deal fears.

Commenting on this, Lee Hardman, a currency analyst at MUFG noted:

‘In the UK, recent data points to a pick up in growth which is good for the Pound but that is being set of by concern over a trade deal.’

Last week saw Sterling remain under pressure after Prime Minister Boris Johnson took a tough stance against the European Union ahead of trade talks.

Pound Canadian Dollar Outlook: Weak UK Business Investment to Send GBP Lower

Looking ahead to Tuesday, the Pound (GBP) could give up today’s gains against the Canadian Dollar (CAD) following weak UK growth data.

If the UK’s flash Q4 GDP data disappoints, it will send Sterling lower.

Meanwhile, the pairing could plummet further following the release of annual business investment data.

If business investment slumps further than expected in the final quarter of 2019, the Pound Canadian Dollar (GBP/CAD) exchange rate will slide.

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TAGS: Pound Canadian Dollar Forecasts