GBP/CAD Exchange Rate Rebounds Following Sharp Reserve in Oil Prices
Updated: The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate tore higher this afternoon, as the bottom fell out of the recent oil rally.
Oil prices plummeted over 6% to under $65 a barrel this afternoon in the wake of a report from Reuters suggesting Saudi oil output may recover swifter than expected.
— Mike Dolan (@reutersMikeD) September 17, 2019
This sent the oil-sensitive ‘Loonie’ tumbling at the start of the US session, propelling the GBP/CAD exchange rate back up to CA$1.6574.
GBP/CAD Exchange Rate Muted amid Surging Oil Prices
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is stuck in a narrow range this morning as oil prices near a fresh four-month high.
At the time of writing, the GBP/CAD exchange rate is trading at around CA$1.6439, virtually unchanged from today’s opening rate.
Canadian Dollar (CAD) Buoyed by Oil Spike
The Canadian Dollar (CAD) remains in focus this morning, as the oil-sensitive currency continues to benefit from the recent surge in crude prices.
Brent crude oil has rocketed up 14% since the week opened, propelling the commodity close to a four-month high as prices climb above $69 a barrel.
The spike in oil prices comes in the wake of drone attacks against oil facilities in Saudi Arabia over the weekend.
The attacks have effectively cut Saudi oil production in half, which equates to roughly 5% of global oil production, stoking fears about potential supply shortages and driving prices skyward.
Analysts are also concerns about how long this disruption could last, with Fiona Cincotta, senior market analyst at City Index suggesting:
‘We can expect oil prices to remain elevated whilst production is disrupted, some reports suggest that this could be weeks.
‘With the US “locked and loaded” awaiting signs from Saudi Arabia that Iran was involved, tensions in the Middle East could get worse before they get better. Under these circumstances the price of oil could remain elevated for some time yet.’
Oil products account for around 20% of Canada’s total exports, causing the spike in crude to reflect positively on the ‘Loonie’.
Pound Sterling (GBP) Rangebound as Supreme Court Hearing on Proroguing of Parliament Begins
The Pound (GBP) is struck in a narrow range this morning, as UK politics remain firmly in focus for investors.
The UK’s Supreme Court opens its three-day hearing on whether Boris Johnson’s proroguing of government was unlawful today.
Edinburgh’s Court of Session ruled last week that the shutdown was unlawful.
However it remains to be seen whether the Supreme Court will agree. GBP investors will likely be hoping for a defeat for the government, which will not only recall MPs but also make it difficult for Johnson to shutdown parliament again next month to push through a no-deal Brexit.
GBP/CAD Exchange Rate Forecast: Slowing UK Inflation to Weaken Sterling?
Looking ahead, the Pound Canadian Dollar (GBP/CAD) exchange rate may continue to retreat on Wednesday following the release of the UK’s latest CPI figures.
Economists forecast tomorrow’s data will reveal domestic inflation slowed from 2.1% to 1.9% in August.
While this is unlikely to have any discernible impact on the Bank of England’s (BoE) rate decision tomorrow, given the bank is awaiting more clarity on Brexit before making its next move, it could still exert some pressure on Sterling.
Meanwhile, Canada will publish its own CPI figures tomorrow afternoon, but with headline inflation expected to remain unchanged last month, they risk being overshadowed by any additional movement in oil markets.