The Canadian Dollar is currently the top performing G10 currency as oil prices have been going from strength to strength over the past couple of days.
With the Loonie (CAD) being a commodity based currency that’s value is heavily influenced by oil prices due to oil being Canada’s main export, the currency has really been boosted by the latest OPEC agreement and the Canadian Dollar’s strength could well continue from here if we’re to see oil continue to climb as it currently is.
The news behind the oil price hitting its highest point ($53 per barrel) over the past year is because Russian President, Vladimir Putin has announced that he’s on board with OPEC’s latest plans to reduce oil production, which is likely to continue to increase the value of oil.
This good news for the Canadian Dollar has coincided with increased pressure on the Pound. After it was announced that the UK will begin the process of leaving the EU in the early months of next year, the Pound has continued to come under pressure and with little to no economic announcements out of the UK this week, I expect the current trend of a weakening GBP/CAD pair to continue.
There has been talk within the UK of a further interest rate cut and should this occur, I would expect to see further Sterling weakness, and likewise with any further talk of Quantitative Easing (QE) we can expect to see the Pound soften off of the back of these types of announcements, which are generally Sterling negative.
Those that plan to convert their Canadian Dollars into Pounds are currently looking at the best levels in over 3 years, and I think what would be most likely to scupper these gains would be a change of sentiment towards the UK and therefore, the Pound. The fundamentals out of the UK are currently quite good so I personally believe the Pound is currently trading below its fair value.