GBP/CAD: Loonie Drops on Weakening Oil Prices Amid Virus Outbreak

GBP/CAD is surging on Monday amid increasing fears that the new virus outbreak in China could hurt the global economy. The pair is currently trading at 1.7262, up 0.40% as of 9:44 AM UTC.

Given that the Canadian economy is an oil-dependent country, the Loonie is declining on weakening oil prices, which have extended their declines on Monday. Brent fell below the $60 mark for the first time in about three months on news that the death toll from coronavirus in rapidly increasing in China. Several businesses were forced to halt their operations.

Brent oil declined by 2.95% to $58.90, the lowest since later October. WTI oil fell 3% to $52.55.

Earlier today, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman Al-Saud stated that OPEC and allied oil-producing countries led by Russia could try to boost the prices in response to demand changes. The Saudi official said that he was watching the situation in China and hoped that the outbreak would be addressed accordingly. The minister said that markets are:

“Primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite (the virus’) very limited impact on global oil demand.”

The virus outbreak in China has already killed 81 people. The new strain of the coronavirus has spread to many countries, including the US, Australia, and Europe. Nevertheless, analysts say it’s too early to assess the potential impact on consumers and businesses.

Elsewhere, the sterling is gaining momentum after industry group UK Finance said that British banks approved the highest number of mortgages in over four years last month. Mortgage approvals rose to 46,815 in December, which is the most since August 2015.

Howard Archer, an economist at EY ITEM Club, said:

“December’s jump in mortgage approvals adds to a growing amount of firmer data and survey evidence suggesting that the housing market could well be changing up a gear after a lacklustre 2019.”

Later this week, the Bank of England will meet to decide the interest rate. While most policymakers said they were inclined to cut the rate, recent positive data might convince the central bank to make no changes for now.

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