GBP/CAD returned to pessimism after two consecutive bullish sessions.
Currently, GBP/CAD is trading at 1.7016, down 0.55% as of 10:40 AM UTC, after showing a similar gain earlier in the morning when it touched a daily peak at 1.7263. The price is now approaching the lowest level since November last year, which was set on March 13.
Loonie Squeezed by Oil Prices
At the opening of the session, CAD showed signs of weakness amid tumbling oil prices, which fell to the lowest level in 17 years, as the coronavirus pandemic is forcing many governments to implement travel bans and social lockdowns.
WTI and Brent crude brands are currently trading at around $25 and $27, respectively. In January, oil prices fluctuated very close to $70 per barrel.
Goldman Sachs cut its price forecast for Brent futures in the second quarter to $20 a barrel, anticipating that global demand would decline a record of 1.1 million barrels per day.
Yesterday, the banking giant said in a note to clients:
“Such a fall would be consistent with the prior large bear markets of 1999, 2009 and 2016.”
Oil prices crashed earlier this month when Saudi Arabia effectively declared a price war against Russia, thus dissolving the OPEC+ alliance. The world’s largest oil producer cut prices and increased output.
Iraqi oil minister, Thamer al-Ghadhban, asked OPEC to meet with Russia and try to rebalance the oil market, but, as ING put it:
“With the Saudis and Russians in a fierce battle for market share, it is difficult to see any quick resolution on this front.”
Sterling Couldn’t Maintain Earlier Gains
Canada is an oil-dependent economy, which is why the national currency is sensitive to any updates in the oil market. However, despite tumbling crude prices, the Loonie managed to stay strong against the sterling, as the British economy is also struggling with the coronavirus outbreak.
Earlier today, the Bank of England announced that British banks borrowed over $15 billion from its USD repo operations on Wednesday, which is the largest amount since the financial crisis.
The BoE stated that it lent $8.210 billion of seven-day funds in its weekly dollar repo operation, and an additional $7.245 billion in a recently launched operation for 84-day funds which is part of the new liquidity measures to boost the economy.
