GBP/CAD is surging on Wednesday, after losing over 0.70% yesterday.
Currently, GBP/CAD is trading at 1.7669, up 1.21% as of 11:15 AM UTC. Since last Thursday, the price has jumped over 4.20%, recovering most of the previous losses.
Bears Still Dominate Oil Market
The Loonie is dragged down by the bearish oil market. Saudi Arabia and Russia have intensified their clash, increasing production in a period when oil demand tumbled to multi-year lows amid the COVID crisis. Yesterday, WTI futures dropped below $20, getting closer to the lowest level in 18 years.
Analysts expect the crude surplus to reach 25 million barrels per day in April, which could overwhelm storage capacity within several weeks.
Jason Bordoff, a former energy adviser to the Obama administration, commented:
“This is a historic oil price collapse, and it is not done yet as the system physically runs out of places to put all the oil. The pain in the shale patch is going to be severe. We will see production shut-ins accelerate.”
Many oil-producing countries, including Canada, have only a few weeks of storage capacity until they have to cut production.
UK Manufacturing Shows Worst Performance in 8 Years
The sterling has also been backed by recent UK manufacturing data, which was less disappointing than expected. Britain’s manufacturing industry tumbled at the fastest pace in eight years last month, as the coronavirus outbreak hit many businesses.
IHS market said that the manufacturing purchasing managers index (PMI) dropped to 47.8 from 51.7 in February, still beating expectations of a decline to 47.0.
Shortages in raw materials and transport delays caused the largest growth in vendor lead times in history, while optimism deteriorated to the lowest level on record.
Rob Dobson, a director at IHS Markit, commented:
“The effects were felt across most of manufacturing, with output falling sharply in all major sectors except food production and pharmaceuticals. The transport sector, which includes already-beleaguered car-makers, suffered the steepest downturn.”
IHS Markit will release the final version of the UK’s dominant services sector this Friday. Most economists warn that Britain’s gross domestic product (GDP) will contract by 10% or more in the second quarter, which may be worse than the Depression about a century ago.
