The recent OPEC (Organisation Petroleum Exporting Countries) agreement and non-OPEC agreement to limit oil production has all helped the price of Oil to rise and helped the Canadian dollar to rise. The Canadian economy is a large exporter of Oil, it accounts for around 20% of the Canadian economy’s exports which means the price of Oil influences the relative strength and weakness of the Canadian Dollar.
There were high expectations that lower oil production this year has harmed the Canadian economy and that that the Bank of Canada could be forced to cut interest rates. At their last meeting on 7th December the Bank of Canada kept their rates on hold citing improving global conditions. The fact that Canada’s main trading partner the US is doing so well should continue to help the Canadian economy and remove the need for any cuts.
Stephen Poloz is the Governor of the Bank of Canada and has highlighted continuing pressures in the Canadian economy which means that Canadian interest rates are likely to remain low for some time.
Canada forms part of the non-OPEC group of countries involved in these oil negotiations but the Canadian Dollar is influenced by the overall activity. I have to say I wouldn’t be surprised if the ‘agreements’ in place were to come under question in 2017. Already the price of Oil has dropped into the mid $50’s having almost hit $60 when the agreements were first announced.
I think it is important to be realistic as many of the countries involved have economies so dependent on Oil production it could really hurt them if their production drops too much. Given all the challenges to get to this point where everyone agreed I would be watching carefully any developments that the agreement struggles. Such pressures could weigh on the recent strength of the Loonie against sterling so clients looking to sell CAD for GBP might wish to take some stock of the massive improvements in the last months. Even with the recent strengthening of the Pound 200,000 CAD sold today would net £15,200 more than prior to the Referendum vote.
OPEC developments could shape the Canadian Dollar as we enter 2017, clients looking to trade the currency should stay in contact with their broker at regular intervals. If you have any questions regarding a transfer, you can email me at email@example.com and Id be happy to assist you.
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