- US inventory data suggests oversupply
- OPEC in discussions with Russia over production freeze
- Iran continue to pump oil into markets since the release of their sanctions
- UK economic data continues to shrug off Brexit vote
Oil prices hit $43 a barrel
Oil prices have fallen sharply since the beginning of the week, due in most part to the oversupply in US stockpiles. Conflicting comments from major oil suppliers have also fuelled a drop in oil prices. Saudi Arabia have refused previously to cap oil supply, which in turn will cause overproduction and impact the value of oil.
Iran have recently had sanctions lifted on their supply which could in turn cause a supply war amongst non-OPEC nations. If OPEC and non-OPEC nations are unable to build a solid deal on freezing supply, and US stock inventories maintain their current levels, oil could continue to fall further which could cripple the Canadian economy.
Canada relies heavily on its oil exports, being one of its most important resources the price of oil is linked to the strength of the Canadian economy, and thus CAD exchange rates.
GBPCAD set for further gains
Economic data from the UK has surprised many since the referendum. The latest construction and manufacturing PMI for the UK showed total rebounds from their previous levels. If this trend continues we could see GBPCAD back in the 1.80 range.
Whilst this is good news in the short term, the UK still remains a member of the EU until Article 50 is invoked. This will produce further volatility for Sterling as we enter 2017, which is when we expect Theresa May to act. Currently we do not know when Article 50 will be enacted which adds further uncertainty for GBPCAD exchange rates going forward. If you do need to buy Canadian Dollars, doing so before the end of the year could be a safe option.