Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Buoyed by Weak Oil Prices
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rallied by around 0.8% this morning after oil prices fell, leaving the pairing trading at around CA$1.7102.
The oil-sensitive ‘Loonie’ slumped today after another emergency rate cut from the Federal Reserve sent oil prices lower.
Rate cuts from the Fed and other central banks failed to reassure markets, and China’s factory output plummeting to a 30-year low, weighed on markets.
Sunday saw the Fed slash its rates near zero in an attempt to shield the economy from the impact of the pandemic. This then triggered the Reserve Bank of New Zealand (RBNZ) to cut rates to a record low.
Following this, the Bank of Japan (BoJ) eased its monetary policy further in an emergency meeting.
Commenting on this, chief market strategist at FXTM, Hussein Sayed noted:
‘It’s becoming evident that the major central banks across the globe are using all their available tools to prevent a crisis, but it seems the fear of the pandemic is taking control of investors.’
Meanwhile, crude oil prices suffered as Brent crude’s premium to WTI is near its narrowest since 2016. Commenting on this, ING analyst, Warren Patterson noted:
‘The relative weakness in Brent shouldn’t come as too much of a surprise, given the severity of the breakout across Europe.
‘Another factor offering relatively more support to WTI is news that President Trump has ordered Strategic Petroleum Reserves to be filled up at these lower price levels.’
Fed’s Second Emergency Rate Cut Sends the Pound (GBP) Higher
Sterling made gains on Monday after the Federal Reserve’s second emergency interest rate cut.
Other central banks including the Bank of England (BoE) took steps to relieve the shortage of US Dollars (USD) and provided extra liquidity as part of coordinated global action.
The Pound was able to make gains against the riskier ‘Loonie’, and the slump in the USD helped this.
Although, Sterling did not perform as well as traditional safe-haven currencies such as the Swiss Franc (CHF) and Japanese Yen (JPY), and even the Euro (EUR).
Commenting on this, FX strategist at Societe Generale, Kenneth Broux noted:
‘The Euro is currently profiting [after the Fed cut] as it is seen as a safe haven over the Pound.
‘Both the UK and Eurozone economies are likely to see a negative quarter or two of growth at least. But the Eurozone has a current account surplus, it doesn’t rely on foreign investment to the same extent.’
Patterson also added that the BoE may announce further stimulus measures in this month’s monetary policy meeting. This could include cutting interest rates or restarting quantitative easing.
Pound Canadian Dollar Outlook: Will Weak Canadian Manufacturing Sales Send CAD Lower?
Looking ahead to Tuesday, the Pound (GBP) could continue to make further gains against the Canadian Dollar (CAD).
If UK unemployment data remains at the current lows and wage growth is higher than expected in January, Sterling will rise.
Meanwhile, the ‘Loonie’ could suffer further losses following the release of Canadian manufacturing sales data.
If January’s sales slump further than expected, it will send the Pound Canadian Dollar (GBP/CAD) exchange rate higher.