Oil prices surged strongly today, hitting the highest level this year due to the weak dollar and declining US production. Brent crude futures have reached their highest levels since November, at $46.77 per barrel, up nearly 20% in April. US West Texas Intermediate crude futures inched up 89 cents to as high as $49.90 per barrel.

The up-move in oil prices has had a positive impact on the Canadian dollar, taking the Loonie higher against the US dollar. The expectations of a Bank of Canada rate hike this year have reached 24% from near zero after the retail sales data was reported on Friday, according to  overnight index swaps (OIS). The Canadian dollar has seen little reaction to comments from Bank of Canada Governor Stephen Poloz that it would take another serious economic shock for the BOC to consider cutting rates again.

In Britain, the economy has showed sluggishness this year on a slowing global economy and uncertainty regarding continued membership of the EU. The economy has been depending mainly on the services sector to drive growth. In data released earlier, the nation’s gross domestic product rose 0.4% in the first quarter of the year, down 0.6% compared with the data released in December 2015(for the fourth quarter of 2015), according to the Office for National Statistics.

On Wednesday, the Organization for Economic Co-operation and Development has warned that Britain could face a serious current account deficit if it votes to leave the EU, causing the sterling to slip harder after the statement.

Fig. GBPCAD D1 Technical Chart

GBPCAD extended its recovery to as high as 1.83559 after falling continuously from the resistance area at 2.09484, the highest level of the year. RSI has just escaped from the oversold zone, hovering at around 44 and pointing downwards, suggesting that the bear market is still strong. The pair is expected to hit the resistance at 1.84897 before dropping back.

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