GBP/CAD is declining on Friday, ending flat on the week. Currently, the pair is trading at 1.7417, down 0.57% as of 10:50 AM UTC. In the morning, the price was somewhat bullish, but it suddenly dropped after WTI surged over 9% while the UK released disappointing services PMI data.
Oil Prices Jumped 24% Since April 1
The Loonie has been supported by surging oil prices, with WTI futures gaining over 24% since April 1. Crude prices started to revive after US President Donald Trump told CNBC that he had urged Russia and Saudi Arabia to reach consensus and cool their conflict. It seems that Saudi Arabia wants to organize an urgent meeting between OPEC and its allies led by Russia.
Oil prices have been under massive pressure during the last few weeks after Saudi Arabia escalated a price war against Russia, thus dissolving the OPEC+ alliance. The world’s largest oil producer increased crude output and cut prices, which caused an unprecedented situation since oil demand is dramatically declining amid the COVID-19 pandemic.
At the beginning of the week, Brent was down over 60% year-to-date. Since April 1, the British crude brand has surged over 24%, to the current level of $32.46.
UK’s Services PMI Suffers Record Decline
Besides a stronger Loonie, the sterling has declined on disappointing data at home. IHS Markit recently reported that Britain’s services purchasing managers index (PMI) tumbled to 34.5 last month, from February’s 53.2, which is the steepest decline on record. The dominant services industry fell below the flash reading of 35.7.
Thus, the composite PMI, which merges the services and manufacturing industries, declined to 36.0 from 53.0 in February, below the preliminary data of 37.1.
Based on the PMI data, Britain’s gross domestic product (GDP) is about to show the worst performance in more than a century, as the coronavirus outbreak disrupted entire industries. The number of COVID-related deaths in the UK continues to increase.
Andrew Wishart, an economist at Capital Economics, said:
“We are forecasting a 15% fall in GDP in Q2, a larger fall in output than in the financial crisis or the Great Depression. Our base case is that the recession won’t be as protracted as either of those episodes. But evidence that unemployment is shooting up despite the government response raises the risk that the recovery takes longer than we expect.”