The major oil producing nations will meet next week to discuss to potentially put the final details into an agreement that will regulate the amount of oil being pumped into the market. There is a huge amount of scepticism surrounding the event as OPEC nations have never been able to come to a decision in the past.
Earlier this year the cost of a barrel of oil went through the floor as the output levels along with Iran being included into the market produced a huge overproduction. Since then there has been a stabilisation however some nations have enjoyed the race to the bottom essentially pricing out some producers. The Canadian Dollar is incredibly volatile when the oil markets move and the decision next week could have a major factor. The GBP/CAD rate has been low recently with the weakness faced by Sterling since Brexit. However moving forwards as Sterling regains lost ground, CAD weakness could help the rate back above 1.70.
Poor Retail Sales for September
This afternoon retails sales data for Canada came in 0.5% worse than expected showing there was no improvement from the previous month. The Canadian economy has struggled since the wildfires at the start of the year and should there be a deduction in consumer spending this could affect inflation levels.
Over the next few months there is no doubt that Canadian policy makers will be keeping an eye on Donald Trump as he looks to change the path for the US. There has been so much focus on what trade deals Trump will look to renegotiate the future strength of the Canadian Dollar may soon be under threat
That being said, Trump plans to build a 1900km oil pipe connecting Alberta’s rich oil supplies to US soil, known as the Keystone XL pipeline, this could in fact benefit the Canadian economy if the plans go ahead.
Oil prices remain on the lower end of $50 with further advances likely if an OPEC deal can be achieved. Personally I would not get any hopes up given the difficulties faced between Iran and Saudi Arabia, who have been unwilling to cooperate with one another. If OPEC are able to arrange an all-round agreement then oil prices could begin to mend from their recent lows. This in turn would likely benefit the Canadian Dollar, and coupled with Brexit concerns rates may reverse from their recent highs.
Canadian Dollar buyers may benefit from taking advantage of the recent rally in Sterling’s favour, as I envisage the Brexit scenario to get much more complicated as we approach 2017.