The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate softened on Thursday as oil prices advanced following comments made by the Organisation of Petroleum Exporting Countries (OPEC).
Oil Prices Rise
Oil prices surged higher to lend support to oil producing nations and currencies such as the Canadian Dollar, Russian Ruble and Norwegian Krone. The rise in prices came after OPEC said that it expects demand for oil to rise this year and that the market will show a slowdown in supply growth.
Prices of ‘Black gold’ were also supported by the softening of the US Dollar which fell because of the Swiss National Bank’s decision to ditch its currency cap with the Euro.
OPEC said in its monthly report that it had lowered its forecasts for the increase in non-OPEC oil supply this year. The group expects oil producers such as the USA and Norway will blink first and taper their production in order to support prices. It expects the US to slash its production by 100,000 barrels per day. It added that the fall in prices is also expected to support global demand.
‘OPEC’s monthly report has taken over the focus with prices seemingly rising on their view that US supply will slow. However, when you see another record production from the US last week despite a 12% cut in rig counts it does not give much hope for OPEC that reductions will come from the US,’ said Ole Hansen, head of commodity strategy at Saxo Bank.
UK data disappoints
The Pound meanwhile was softened earlier in the session by the release of a report, which showed that house prices across the UK rose at their slowest pace since May 2013 in December. The Royal Institution of Chartered Surveyors (RICS) said its monthly house price balance sank to +11 in December from +13 a month before. The index measures surveyors’ assessment of whether house prices have risen or fallen on an annual basis over the previous three months.
Sterling is also under some pressure from concerns over May’s general election. With the result not certain, economists are fretting that the outcome could lead to a referendum being held on the UK’s membership of the European Union.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast
Despite today’s rise in oil prices, the Canadian Dollar is forecast to remain under pressure in the long term.
‘Until oil stabilises, the Canadian Dollar is at risk of trending lower. Once it stabilises we would expect the lows in the Dollar to be reached in the second quarter of this year and then it too should stabilise,’ said Camilla Sutton, Chief FX Strategist at Scotiabank.
