Oil prices took a tremendous beating in the session of Monday, which was very much in line with the general market sentiment. However, there certainly is specific fundamental reasoning, behind oil taking a hit.
As the Coronavirus spreads globally, several flights are being grounded, due to the country lockdowns. Airlines are already feeling the squeeze, in a crisis which is very much within its infancy.
Given the mass decline in flights, this means there will be a sharp decline in demand and use for oil. Transportation is a big consumer of the black gold, if demand is falling, the price can only go one way, and that is south.
In the FX markets, CAD has been significantly on the receiving end of this. The Canadian Dollar has a strong correlation with the oil markets. It is being forced to deal with both falling oil prices and also the economic impact of Coronavirus.
Late last week, the Bank of Canada had to take action and cut interest rates. They slashed by 50bps to 0.75% from 1.25% and said that it stands ready to adjust monetary policy further if required to support economic growth and keep inflation to target. The BoC said it took these proactive measures in light of the Covid-19 pandemic and a recent sharp drop in oil prices.
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