The CAD has been driven by increasing oil prices, as Canada is an oil-dependent economy. Both WTI and Brent crude brands are experiencing the first weekly gain in six weeks, with oil prices updating the February peak. Investors are betting on oil on hopes that OPEC and its allies will extend production cuts to address the slowing demand caused by the coronavirus outbreak. Besides this, the fears of the epidemic itself have eased as China reported fewer deaths and new cases compared to Thursday.
Both Brent and WTI crude futures have increased over 1.40% at the time of writing.
OANDA analyst Edward Moya told Reuters:
“Oil prices appear to have stabilised this week on optimism that OPEC+ will once again do whatever it takes to tighten output and on hope that the coronavirus peak is nearing.”
The death toll from the coronavirus, now called COVID-19, has reached over 1,350 people, most of them in mainland China. The outbreak has damaged China’s economy and disrupted energy markets. Brent has declined by 15% year-to-date. The sentiment worsened yesterday when China announced it had changed the diagnosis method, which boosted the daily number of new cases by nine times. Analysts feared that Beijing had previously manipulated the figures to hide the true scale of the epidemic.
Nevertheless, the sentiment improved today, especially considering that China started to green light companies to restart operations. Also, the government eased its monetary policy.
Analysts hope that the repercussions on the oil demand would keep limited to China and won’t extend to other countries.
Helima Croft, head of commodity strategy at Citadel Magnus, commented:
“Our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand.”
Besides a stronger loonie, the sterling is declining on fresh political concerns, as UK finance minister Sajid Javid resigned after having a face-to-face row with Prime Minister Boris Johnson.