GBP/CAD is in free fall on Wednesday. Currently, one British pound buys 1.7302 Canadian dollars. This is the third consecutive bearish session for the pair. Still, larger timeframes show that the price is still moving sideways. The pair is about to test a strong support level near 1.7200, and if it breaks below it, the downtrend might continue.
The Loonie is support by recovering oil prices, as WTI futures for June delivery jumped almost 15%. The crude has been surging today as US stockpiles increased less than expected. Also, market participants hope that demand will increase as some European countries are ready to lift some lockdown restrictions.
Yesterday, the American Petroleum Institute said that crude inventories in the US increased by 10 million barrels to 510 million in the week that ended April 24. Analysts anticipated an increase by 10.6 million barrels.
Lachlan Shaw, head of commodity research at NAB, commented:
“It’s a little bit of good news that maybe storages aren’t filling quite as quickly in the U.S. as you would have thought.”
“The other thing coming through is more detail and a louder groundswell towards plans for removing COVID restrictions, particularly in Europe — in countries like Spain, France, Austria and Switzerland. That’s going to see demand pick up,” Shaw added.
Later today, the Energy Information Administration (EIA) will release its weekly measure of US inventories, which will also impact oil prices.
Pound Weaker as Britain Cannot Reach Trade Deal with EU
Besides a stronger Loonie, the pound is losing ground after Prime Minister Boris Johnson made it clear that the UK was not ready to lift the lockdown restrictions.
Meanwhile, European diplomats and officials hinted that negotiations between the bloc and the UK were at an impasse due to the coronavirus and disagreements between the two parties.
Britain formally left the European Union on January 31 of this year. Johnson’s government had to negotiate a trade deal until the end of this year in order to ensure a smooth transition process. However, this might not happen, given that the tight timeline has been disrupted by the pandemic. Chances are that the UK is heading towards a no-deal exit, which is the worst-case scenario. However, it doesn’t seem to matter since the COVID outbreak is sending the UK into one of the worst recessions in centuries with or without a deal with the EU.
