Over the last few weeks Canada’s largest export, Oil - which makes up for 10% of the country’s GDP - has collapsed falling to levels last seen in 2008. This has been caused by a massive oversupply in the market with an increase in the number of companies drilling for oil. The concern is now that the stockpiles in Canada are now full and the pipelines being overrun.
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Several companies are now looking to cut production, and even taking steps to encourage officials in charge to mandate output cuts until the oil is cleared. At the current rate companies’ profits are being slashed and the prospects look grim if this continues for a considerable time.
Oil is one of the main influencers for the Canadian dollar and the current oil price crisis is forecasted to be costing between 80-100m Canadian dollars a day. The Canadian Central Bank raised interest rates this year trying to keep track with the US Federal Reserve, however expectations may start to come under threat if the issue continues.
Some experts are suggesting that President Trudeau may start coming under pressure to fix the problem, as outside the major corporation’s profits, oil is a major industry with a huge amount of jobs attached. Trudeau had previously tried investing heavily into oil expansion coupling that with environmental measures. His efforts to clean-up oil production may now be part of the problems, and he doesn’t look to have a solution.
The GBP/CAD exchange rate has followed a volatile path over the past few months and it looks like this could continue.
Over the next few weeks in the run-up to the Brexit Parliament vote, there is a strong chance that the Canadian dollar may lose ground against sterling despite the uncertainty in the UK.
If you’re looking to sell Canadian dollars it may be worth capitalising on these current rates as economic data moving forward will start to include oil disruption. Furthermore any positive developments with the Brexit deal could see the rate rocket.
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