The concerns surrounding oil are starting to mount as oversupply in the market and increased production in alternatives such as shale gas in the US begin to take hold. The price of a barrel of Oil is already edging towards the $50 a barrel mark and should we have a return to levels below that then the Canadian Dollar could really start to suffer.
The GBP/CAD has moved over three cents away from the lows at the end of last week and in my opinion this could continue as we move towards the New Year. The Canadian economy relies on Oil as its major export and judging by the data yesterday there is already evidence of issues.
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Yesterday the Consumer Price Index which is a key indicator of inflation missed the 1.8% expectation coming in at 1.7%. Whilst not a major miss the previous month saw inflation up at 2.4% which is a sharp fall in a considerably small space of time of 0.7%.
The Bank of Canada raised rates this year to try and remove the disparity between themselves and the US economy however as things stands that could seem to be a premature move, especially if the oil industry profits are set to take a major hit.
The Central Bank earlier this week revised growth forecasts for 2019 down to 1.9% following a 2.1% growth this year, purely based on the economic concerns next year.
Stephen Poloz the Governor of the Bank of Canada had to defend the economy after a few economists suggested Canada was heading into a recession in 2019. Poloz suggested he doesn’t buy into that idea and that’s only the case if the worst case scenarios unfold.
Canada has had a turbulent year from a trade perspective with trade tariffs and relegations with the US following Trump's end to the NAFTA agreement. Poloz sighted that through all of this uncertainty Canada has essentially been collateral damage.
If you’re looking to sell Canadian Dollars it may be worth capitalising on the rate at the moment. The Canadian Dollar has seen major gains and arguably becoming overvalued, which may slowly start to unravel as we move into 2019. Make sure if you’re looking to trade your broker is aware of your requirement, making sure you can capitalise on any movements in your favour.
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