• Oil prices could fall to $40 a barrel
• Saudi oil flooding the markets at record high
• Implications for GBPCAD

Lower oil prices could benefit GBPCAD exchange rates

Again Capital’s John Kilfduff told CNBC that oil prices could get worse before they get better. Whilst oil prices have recouped some of its lows of 2016, crude oil still trades below $50. Much of the recent rally in brent and crude oil has been centered around speculation that Russia and OPEC have entered agreements to boost oil prices.

Whilst the news has prompted positivity amongst markets, Saudi Arabia remains one of the biggest threats to oil prices.

Saudi oil flooding the markets

The Saudi’s have frozen its production promises after Iran said it would not participate in discussions around market share. What we are essentially seeing her is an oversupply of oil which is driving the value of the barrel down.

Last week, the Saudis reported a record high production of nearly 10.7 million barrels per day in July, with further gains in production for August.

GBPCAD rates could be affected

The value of CAD is primarily linked to oil prices given its huge output. If oil continues to fall off the back of oversupply Sterling could recoup some of its losses following the Brexit vote.

That being said, whilst oil prices have the potential to impact GBPCAD exchange rates, Brexit remains the number one global concern for markets. If UK consistently reports an upbeat economic climate we may begin to see a shift in current levels.

GBPCAD rates are currently trading at 1.68, returning from lows of 1.66 off the back of positive UK retail sales.