The Canadian Dollar was off to a rough start this week as its performance weakened against the U.S dollar. The CAD’s underwhelming performance is largely attributed to the declining oil prices which have been exasperated by the economic slowdown caused by the coronavirus pandemic.
The Canadian Dollar, experienced noteworthy weakness against its U.S. counterpart from Sunday to Tuesday. This is because Canada is one of the largest crude oil exporters and so oil exports contribute significantly to the performance of the Canadian economy. crude oil prices have been going down due to the lower demand as quarantine and self-isolation set in. People are indoors so they are not travelling much and as a result, they are consuming less energy.
The Canadian dollar’s poor performance is evident on the above chart which demonstrates its performance versus the U.S dollar. The USD/CAD surged from Sunday’s low at 1.3922 to a high of 1.4349 on Tuesday before a pullback manifested on Tuesday afternoon as the Canadian dollar attempted to recover some of its losses.
Airlines have also been grounded on account of the coronavirus outbreak and this is bad for the oil industry since airlines are the largest fuel consumers. Less energy consumption means less demand for fuel, thus the lower prices and subsequently the impact on the Canadian dollar. Additionally, members of the Organization of the Petroleum Exporting Countries have increased their efforts of pumping crude. On the other hand, Saudi Arabia is running their activities as usual when they should be doing the opposite to facilitate price stability.
The market is waiting for news for the oil and gas industry
Canada is one of the major exports of oil, a key mover of the countries revenue. Amid the crisis and tightening lockdown measures, there is every need for producers, manufactures and businesses to prepare for a reality of tough times ahead.
Businesses can no longer pay wages. They are struggling with interest rates. However, the Canadian government has a program, which takes care of such cases of helping enterprises and charities. This is according to the country’s Prime Minister, Justin Trudeau. Following this measure, the government has already set aside 75% to cover wages for small businesses. Besides, the key interest rate has been reduced to 0.25%.
In other news, the rising bankruptcies of the U.S, drop in oil prices and the effects on the Shale producing companies have caught the attention of President, Donald Trump. Reliable sources revealed that he had called Vladimir Putin, the Russian President. The duo discussed and explored various ways of supporting oil prices.
Nonetheless, it remains unclear whether or not Russia will act in support of the prices given the various sanctions the US has placed on it. Meanwhile, the COVID-19 fatalities in the United States have surpassed that of tally in China. It has come third in the listing of countries with the highest death toll and those ignoring strict social distancing orders have been blasted.