GBP/CAD: Pound Enters New Year on Positive Note

GBP/CAD extended the uptrend on Tuesday. Currently, the pair is trading at 1.7200, up 0.41% as of 11:15 AM UTC. 

The Loonie is under pressure amid declining oil prices. Nevertheless, both Brent and WTI crude brands will show the biggest annual growth since 2016. 

Brent has increased by 24% since the beginning of the year, while WTI has gained 35% for the same period. Thus, both benchmarks are about to record the highest annual gains in three years. Oil prices have been supported by US-China trade negotiations and production cuts scheduled by the Organization of Petroleum Exporting Countries (OPEC). 

Yesterday, White House’s trade adviser Peter Navarro said that the phase one trade deal between the US and China would be inked next week. 

Besides, investors are watching the tensions in the Middle East. On Sunday, the US launched airstrikes against the Katib Hezbollah militia group in Iraq and Syria. As a result, operations at an oil field in Iraq halted for a while. 

In the last day of the year, oil prices have entered a correction phase, which doesn’t bode well for the Canadian dollar since Canada is an oil-dependent economy. 

Stephen Innes, AxiTrader’s chief Asia market strategist, commented:

“Oil prices have followed the general de-risking drift into year-end despite a rise in Middle East tensions and last week’s bullish-for-oil-price inventory draws as the broader markets appear to be losing some of that holiday cheer.”

Elsewhere, the British pound has been trying to recover the losses of a dramatic bearish trend triggered by fears of a potential no-deal Brexit. After the UK election won by the Conservative Party, Prime Minister Boris Johnson decided to ban any attempt to extend the Brexit transition period beyond December 2020. If the UK fails to reach a trade agreement with the European Union by that time, it may leave the bloc without a deal. 

European leaders do not welcome the tight timeline and hope that Johnson will change his mind. These hopes have been supporting the sterling since last Monday when GBP/CAD was trading slightly below 1.7000. 

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