GBP/CAD continues to advance on Wednesday, though the pace has slowed. Currently, the pair is trading at 1.7064, up 0.07% as of 9:35 AM UTC. The pair will likely become more volatile later today as Canada will report on inflation while its central bank will announce the interest rate decision.
Yesterday, the sterling gained about half a percentage point against the CAD after the UK’s Office for National Statistics (ONS) said that the number of employed people had increased 208,000 in the three months to November, while analysts expected an increase of 110,000. The positive labor market eased concerns that the Bank of England (BoE) might cut the interest rate at its next meeting on January 30.
The Loonie is losing ground amid declining oil prices, with both WTI and Brent crude brands tumbling over 0.65% today. Canada is an oil-dependent economy, which is why the CAD reacts to oil fluctuations.
Yesterday, the International Energy Agency (IEA) predicted a surplus in the oil market in the first half of the year. The IEA’s outlook eased concerns over disruptions that have cut Libya’s oil production.
IEA director Fatih Birol said that the oil market will be in surplus by a million barrels per day. He told Reuters:
“I see an abundance of energy supply in terms of oil and gas. It’s the reason that recent incidents we have seen – with the Iranian general killed, Libya unrest – didn’t boost international oil prices.”
Libya’s National Oil Corp (NOC) said on Monday that two major oil production facilities started to shut down amid a military conflict. Initially, oil prices surged in response, but the bullish sentiment faded after investors realized that problems in Libya cannot affect the global supply.
Besides this, the fears of outbreak of a new coronavirus in China put pressure on oil demand. If the outbreak will grow to the size of SARS epidemic of 2002-2003, then demand for oil might decline by 260,000 barrels per days, Goldman Sachs stated in a note to investors. The bank’s analysts said:
“Demand concerns over a potential epidemic will counter concerns around supply disruptions in Libya, Iran and Iraq, driving spot price volatility in coming weeks.”