Currency exchange rates are intrinsically linked to the global economy. That’s why every week at theCurrent we bring you the world’s biggest business stories. This week: the NHL weighs in on the loonie, oil prices rebound – good for the loonie, but too little too late for Venezuela.
Oil Prices Rebound as Production Stalls
West Texas intermediate prices briefly climbed to US$50.03 on Thursday during trading hours, before falling to US$49.48 at close. Oil prices have not climbed above US$50 in seven months, and have not closed above US$50 since July of 2015. Production issues in Nigeria, Venezuela, and Alberta (due to the wildfire) are believed to be the cause of the spike. Although the news has been welcomed by oil producers, it is far from guaranteed that higher prices will continue.
OPEC will be meeting on June 2nd, and many analysts had hoped that it might lead to an agreement to cut oil production to raise prices. Unfortunately, the recent surge makes an already unlikely outcome even less probable. Saudi Arabia pumped 10.26 million barrels per day in April, reaching near record high production levels, and demonstrating their commitment to keep oil prices low. The news is not all bad, as investment giant Goldman Sachs has revised its oil price forecast in the wake of the recent price surge. Prices are likely to remain around US$50, and will not fall to the US$20 low that they had previously predicted.
Oil Powered Loonie
Rising oil prices helped push the loonie up above the US$0.77 mark. Another factor behind the loonie’s spike last week was a positive economic outlook report from the Bank of Canada. The Norwegian krone, which is closely linked to energy prices as well, also had a good week. A stronger loonie could hurt Canadian exporters, but will be a boon for travellers and importers. Again thanks to oil prices and good news from the bank of Canada the TSX rose above 14,000 points for the first time since August.
Bettman Bets on the loonie
In a recent interview with Bloomberg Gary Bettman, the NHL league commissioner, said that the low value of the loonie could cost the NHL as much as $200 million. That is despite the recent rebound from a low of 68 cents to 77 cents this week. The commissioner expects the CAD to even out around 80 cents US soon.
Low oil prices have taken a toll on Venezuela more than any other country. High inflation, shortages of food and goods, and power outages have wracked the South American nation. President Nicolas Maduro has tried to declare a state of emergency due to the 180% inflation rate, but was denied by the opposition held National Assembly. Venezuela’s economy was reliant on oil which made up 95% of the country’s exports, while producing very few other products, and remaining heavily reliant on food imports. Price controls implemented by the socialist government also forced many producers to stop making basic goods, in order to operate at a profit. Venezuela’s currency is also heavily regulated, with different government mandated exchange rates implemented depending on the person (or business) importing different kinds of goods.
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