GBP/CAD is extending its gains on Monday, after increasing by 0.33% on Friday. Currently, one British pound buys 1.7487 Canadian dollars, up 0.29% as of 10:50 AM UTC. At the end of last week, the price couldn’t break below a strong support level near 1.7350 and bounced back. Judging by larger timeframes, the pair hasn’t been trending since the end of March.
The Loonie is again betrayed by declining oil prices. Both WTI and Brent futures have declined on Monday as oil companies are forced to slow production as there is no more room for storage.
WTI futures tumbled over 17% to $14 while Brent declined by almost 5% to below $24, extending the losses over the last week.
The OPEC+ countries will start its coordinated effort to cut output only this Friday, but analysts say that this will not be enough to offset the dropping demand.
Analysts Fear Another Collapse to Negative Territory
Investors were shocked when WTI futures for May delivery collapsed into negative territory for the first time ever. At one point, the contract touched a low of -40$.
Ben Luckock, co-head of oil trading at Trafigura Group, said that negative prices were “the slap in the face that the market probably needed.”
“The market was producing too much crude oil and people were just trying to hold on for a while,” he added.
Ehsan Khoman, head of Middle East and North Africa research at Mitsubishi UFJ Financial Group, said that oil prices fell because North American companies have no choice but to cut production by 10 million barrels per day on top of the 9.7 million agreed by OPEC+ members.
The WTI contract is under pressure because investors are rolling over later months to avoid another collapse experienced with the May futures. Tony Nunan of Mitsubishi Corp, commented:
“Anybody who has had length who doesn’t have storage contracts has either closed their positions (in June) or rolled far forward […] because it’s suicide to carry a position into the close after seeing what happened last month.”
In the UK, Prime Minister Boris Johnson returned to work and delivered his first speech after leaving the hospital. He warned against easing restrictions, even though the economic consequences would be hard to bear.
