Declining Oil Prices Drag Down the CAD
The Canadian dollar couldn’t leverage sterling’s weakness amid fears of the coronavirus presence in Europe. The Loonie has itself lost ground against the USD and other majors, being dragged down by declining oil prices.
Both Brent and WTI crude oil brands have declined 2.70% on Monday, to the lowest level since February 13. The rapid spread of COVID-19 prompted fears that oil demand would tumble, which would affect Canada’s oil-dependent economy.
AxiCorp’s chief market strategist Stephen Innes commented:
“We should not underestimate the economic disruption as a super spreader could trigger a massive drop in business activity around the globe of proportions the world has never dealt with before.”
South Korea’s government raised the alarm after the total number of infections jumped to more than 700 cases, and the death toll rose to seven.
In Italy, the number of cases rose to over 150, with a third death being confirmed earlier today. The famous Venice Carnival was cancelled, while several football matches from the Serie A leagues were postponed.
Iran is another country where the virus is spreading rapidly. It’s worth noting that Iran is a major oil producer. Saudi Arabia, Afghanistan, Kuwait, Iraq, and Turkey have already imposed travel restrictions on Iran.
Chinese President Xi Jinping said yesterday that the country would adjust its policy to help reduce the consequences of the virus the world’s second-largest economy.
Oil prices eased also because the rig count in the US increased for a third week in a row. Baker Hughes said that drillers had added one more oil rig last week, bringing the total number to 679, which is the highest since the end of December last year.
Elsewhere, the pressure on the sterling is increasing as the trade talks between the UK and the European Union are getting closer. On Saturday, French President Emmanuel Macron expressed doubts over Britain’s ability to achieve a trade deal with the EU by the end of this year.