• Oil prices slump, weakening CAD
• Morgan Stanley predict oil may fall back to $35 a barrel
• BoE could cut interest rates favoring CAD sellers

The GBP/CAD rate is slowly on the rise as Sterling finds strength along with the CAD coming under pressure. The CAD is very much at the mercy with the price of Oil and is exposed to the market movements.

The price of a barrel of Oil having previously jumped above the $50 mark has fallen to a 3 month low and has dropped below the $45 level. The reason for the drop has once again been put down to the oversupply of Oil around the world. Whilst Canada had their own disasters, there was also disruption in Libya and Nigeria.

However the majority of these disruptions have been resolved and production has been strengthening in these areas. To add to the problem, Saudi Arabia matched its highest every production level for the month. OPEC regions have been essentially trying to flood the market and price out the companies who have high production costs. Morgan Stanley only yesterday predicted the price of a barrel of oil will fall back to $35 region.

This will have a significant effect on the Canadian Dollar, as Canada is a major exporter of Oil. The GBP/CAD rate could well start to creep back towards the 1.80 levels of the back of the Oil movements. However it will be worth considering that currencies work in pairs and the rate can also be affected by Sterling.

The Bank of England could look to cut interest rates in the coming month which would be likely to create weakness for Sterling in the short term at least. This could work in favour of CAD sellers. It is a strange situation where both currencies face a negative outlook as generally one currency rises of strength.

If Sterling is able to avoid a rate cut on the 4th August I believe the GBP/CAD could well start to move back into the 1.80’s sooner rather than later.