GBP/CAD is advancing on Thursday, recovering most of the losses suffered yesterday. The pair is now trading at 1.7222, up 0.30% as of 10:40 AM UTC.
The Canadian dollar is declining on fears that the coronavirus outbreak will affect global oil demand. As a result, Canada’s oil-dependent economy might be affected. The International Energy Agency (IEA) said earlier today that oil demand would decline this quarter for the first time in about 10 years, citing the coronavirus effect.
IEA suggests that oil markets today note a visible surplus despite the production cuts from OPEC and its partners, including Russia. Last week, WTI oil already tumbled below $50 a barrel, but the full impact of the coronavirus will be felt in the coming months.
The agency stated:
“Demand has been hit hard by the novel coronavirus and the widespread shutdown of China’s economy. The crisis is ongoing and at this stage it is hard to be precise about the impact.”
The IEA said in its monthly report that world fuel consumption would contract by 435,000 barrels a day, while it was previously expected to grow by 800,000 barrels a day during the current quarter. For the entire year, the virus effect will reduce growth in global oil consumption by 30% to 825,000 barrels a day, which is the lowest since 2011.
It is unlikely that consumers will benefit from the decline in oil prices given that the virus outbreak will cause much greater damage on the wider economy.
The number of new cases and deaths in China surged on Thursday after Hubei authorities changed the method of diagnosis, which sparked speculation that the severity of the epidemic hasn’t been reported adequately.
The Hubei province, whose capital city is Wuhan, reported 242 deaths and 14,840 new patients in a single day after the new diagnosis approach was introduced, which is a new record. For comparison, the average number of new cases was below 1,500 until yesterday.
The sterling benefits from the crisis and attempts to recover the losses suffered during the last week. The currency is supported by signs that the consumer and business sentiment has been improving after the December election.
