GBP/CAD recently broke above the resistance line of the steep bearish channel, suggesting that it might be ready to make a u-turn. However, increasing oil prices boosted the Loonie, putting additional pressure on the pair.
Currently, one British pound buys 1.7052 Canadian dollars, down 0.02% as of 11:00 AM UTC. The price hit the daily peak at 1.7098, but it started to point downwards a few minutes ago.
Both the UK and Canadian markets are closed on Boxing Day, with the forex pair trading on very low volumes.
The Loonie benefits from increasing oil prices, with the Brent benchmark surging to above $67 for the first time in more than three months, driven by optimism around the trade deal between the US and China, OPEC’s efforts to cut production, and a recent report suggesting lower US crude inventories.
On Tuesday, oil industry group American Petroleum Institute said that US crude stocks declined by 7.9 million barrels last week, way more than the modest drop anticipated by analysts.
Stephen Innes, chief Asia market strategist at AxiTrader, commented:
“Oil prices continue to show year-end strength supported by a combination of definitive progress on the US-China trade deal, the Dec OPEC/OPEC+ agreement, and slowing shale activity. All of which is pointing to a stronger performance for oil prices in Q1 than anyone had thought only two months ago.”
The OPEC+ group, an oil supercartel that includes OPEC countries along with non-OPEC nations led by Russia, agreed earlier in December to deepen supply cuts that would reduce production by about 2.1 million barrels per day starting from January 1, 2020.
Elsewhere, the US and China finally reached consensus on the sensitive trade issues and are about to sign the phase one trade deal, likely in the first week of next year. US President Donald Trump and Chinese government officials revealed on separate occasions that there would be a signing ceremony soon.
The pound has strengthened during the Christmas holidays, are investors shifted focus from no-deal Brexit fears. However, bears may come back stronger and extend the sterling’s bearish mood.
