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You are here: Home / Canadian Dollar / Oil price slump affecting GBPCAD exchange rates

Oil price slump affecting GBPCAD exchange rates

September 15, 2016 by Rob Lloyd

Oil price slump affecting GBPCAD exchange rates

Sterling continues to climb against the commodity currencies post-Brexit, as investors weigh in on the likelihood of a US FED hike by the end of the year.

Whilst commodity currencies tend to have more favourable interest rates, their risk potentials make them less attractive for long term investment.

The US Dollar however, whilst being subjected to lower interest rates, is less prone to currency fluctuations making it a safer bet for investment.

If the FED decide to raise interest rates this year, appetite for the US Dollar will increase, and the gap between interest rates from other currencies will shorten. This could result in money being taken out of the Canadian Dollar, Australian Dollar and New Zealand Dollar.

There is however another concern for CAD, falling oil prices.

Oil prices are crashing

oil prices fallWhat is causing these changes? Libya have ramped up its production of oil following political unrest. Iran equally, are looking to return to their pre-sanction levels and Russia, which have previously promised to work with OPEC in stabilising the price of oil by reducing output, are reluctant to do so unless others are willing to commit to agreements.

It has also been reported that at least 50 US oil companies have gone bankrupt in 2016, with lower oil prices likely the driving force.

With the Canadian economy heavily impacted by the price of oil, it could be one of the few currencies to make significant losses against Sterling in the months ahead. If you have Canadian Dollars to sell, I would consider doing so sooner rather than later.

Filed Under: Canadian Dollar Tagged With: Oil prices, US interest rate

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Rob Lloyd

Robert brings with him a wealth of knowledge on what is impacting exchange rates, especially around the subject of the EU Referendum and the implications for Sterling and Euro exchange rates.

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