The OPEC discussions have lead to some agreements between oil producing nations. This could lead to Canadian Dollar strength in the weeks ahead.
The Canadian Dollar could be in for a volatile period after an agreement by OPEC (The Organisation of the Petroleum Exporting Countries) to cut oil production has finally been made. This is a major step forward as it is the first deal of this nature since 2008. There has been a long negotiation between Saudi Arabia and Iran, regularly clashing over the last few years.
The trigger appears to have been a further fall in the price of oil earlier this week but also the sudden and symbolic decision by Saudi Arabia to make heavy government cuts this week across the board which include reducing minister’s salaries by 20%. This is hugely important considering that more than two-thirds of employed Saudi’s work for the government and clearly highlights a sign of the times. The agreed cut effectively reduces production by around 700,000 barrels per day.
The Pound did find some support against the Canadian Dollar earlier this week but is now under some renewed pressure with these developments. This is of course on top of the Brexit concerns which continue to hamper Sterling.
The Canadian dollar as a commodity currency in theory should strengthen as a result of the move by OPEC as Canada is a net exporter of oil and benefits from higher oil prices. However, it is still too early to tell how successful this agreement will be and another meeting by OPEC is scheduled for November where other producers outside of OPEC including Russia will also be invited to cut production. All the same this agreement should be welcome news for the Canadian dollar and there may be some better opportunities for those clients selling Canadian Dollars.
This afternoon sees Canadian Gross Domestic numbers which could help drive the dollar further. GDP is expected to remain steady although any pick up in the numbers could also see the dollar rally.
Agreements between oil producing nations could lead to oil price increases, which may impact the value of CAD. Speak to us today if you are holding Canadian Dollars on 01494 725 353.
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