GBP/CAD is bullish on Monday as the British market is closed in observance of Easter Monday. Currently, the pair is trading at 1.7459, up 0.59% as of 10:30 AM UTC. The price is now testing a resistance level at about 1.7460.
The Canadian dollar cannot take control over the pair as the oil prices continue to decline despite crude output cuts from the OPEC+ alliance. Brent futures turned bearish on Monday, leaving no trace of previous gains made after the alliance led by Saudi Arabia and Russia agreed on record production cuts. The markets are afraid that even that might not be enough to address the tumbling demand amid the COVID-19 pandemic.
OPEC+ Agrees on Record Production Cut
After four days of heated negotiations, the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia agreed to slash production by 9.7 million barrels per day in May and June, which is 10% of the global supply.
Saudi Arabia, the United Arab Emirates, and Kuwait decided to cut production even deeper than agreed, which would drag the OPEC+ supply down by 12.5 million barrels per day, according to the Saudi energy minister. Nevertheless, analysts are skeptical when it comes to the achievement of agreed cuts.
Even if all countries will comply with the cuts, the decline in oil demand is too large, as fuel consumption has crashed about 30% amid the pandemic.
Harry Tchilinguirian of BNP Paribas commented:
“We expect the OPEC+ decision at best to establish a floor under the market. We do not expect a sustained recovery in the oil price until pent-up demand is released in Q3.”
US President Donald Trump shared his satisfaction about the OPEC+ deal, saying that it could save many jobs in the US energy sector. On the other side, the alliance said that it would like to see the US, Canada, Brazil, and Norway to join the initiative.
Canada hinted that it was ready to cut, but the US made it clear that low prices will reduce output anyway.
Canada is an oil-dependent economy, which is why the Loonie is sensitive to major changes in crude futures trends.
