This week Oil inventories were up a significant amount when there was expected to be a million barrel deficit from the previous week. Currently in the US the estimates are suggesting that there is an oversupply to the tune of 300,000 barrels a day.

Canada’s largest export is oil, which in 2015 made up 19% of their exports. The cost of a barrel of oil has dropped 20% in the last 6 weeks falling from a $52 high.

There is a belief that that the cost of a barrel could continue to fall all the way to $35 a barrel. Considering last week OPEC reported its output hit the highest level in recent years and the Baker Hughes rig count was up, $35 could be a under estimation. For as long as the cost of oil is dropping it’s difficult for the CAD to gain any major momentum, especially when the price swings are so significant.

The Wildfires Destroyed GDP

Canadas GDP dropped by 0.6% in the month of May which was the largest one month contraction in the Canadian economy since the 2009 recession. This was almost completely attributed to the disastrous wildfires which caused a 22% fall in oil production for the month. Canada’s economy is currently growing at its slowest pace in 60 years and the only sector keeping it positive is housing. Much like most of the world low interest rates are encouraging people to take out mortgages in turn creating a boom.

Yesterday’s interest rate cut in the UK has put the GBP/CAD rate just above 1.70. Whilst it would appear the Loonie is strengthening, Sterling has been suffering since the Brexit. Sterling in my opinion will start to strengthen in the not so distant future, if you’re looking to sell Canadian Dollars I would consider cashing in on these rates.

Thank you for reading my CAD currency report, if you have any questions about CAD exchange rates I would be more than happy to discuss them – you can contact me with any queries at brf@currencies.co.uk.

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