Pound to Canadian Dollar Exchange Rate Remains Higher amid Coronavirus Jitters
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is trending higher this week, but its recovery has hit a snag today. The Canadian Dollar (CAD) is stronger due to a rebound in prices of oil, Canada’s biggest export.
GBP/CAD advance attempts have been mixed since last week. Last week saw GBP/CAD briefly climb four cents from the interbank rate of 1.75 to 1.79. The pair ultimately tumbled though and lost five cents.
GBP/CAD opened this week in the region of 1.69. The pair has struggled to hold highs of 1.71 but is still trending in the interbank region of 1.70 at the time of writing today.
The Pound (GBP) is unappealing today as the UK government ramps up its response to the coronavirus pandemic. However, today’s Canadian Dollar rebound may be short-lived.
Pound (GBP) Exchange Rates Pressured as UK Government Toughens Coronavirus Stance
After showing a mixed response on how to handle the coronavirus pandemic last week, the UK government is now toughening its stance. Yesterday, Prime Minister Boris Johnson said citizens should avoid social gatherings, theatres and pubs.
Markets took the news as a sign that Britain’s economy would likely no longer be able to avoid being negatively hit by the pandemic. The Pound has been weaker since then.
UK businesses including cinemas announce major closures today. As a result, the Pound is tumbling on expectations of weaker economic activity.
According to Yohay Elam, Analyst at FXStreet:
‘Prime Minister Boris Johnson has changed his tack on battling coronavirus and now calls to avoid gatherings and work from home when possible.
The new policy is set to inflict considerable economic damage that is hurting the Pound. Chancellor of the Exchequer Rishi Sunak is preparing another aid package, to be presented as early as Tuesday.’
Canadian Dollar (CAD) Exchange Rates See Limited Gains on Oil Price Bounce
Weeks of poor performance in oil prices have left the commodity very cheap. The oil price war wages on as oil producers cut prices in order to put pressure on one another.
However, the latest oil price freefall has come to a pause today. Investors bought the commodity back from cheap levels this morning.
Oil is Canada’s biggest commodity export. This is why the Canadian Dollar is strongly correlated to oil prices.
The Canadian Dollar (CAD) benefitted from this morning’s limited oil price rebound. It clawed back some of yesterday’s losses against Sterling (GBP).
Still, the Canadian Dollar outlook remains gloomy. Oil price falls are likely to resume soon, and coronavirus fears continue to leave trade-correlated currencies like the Canadian Dollar under pressure.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Advance Could Resume
With no end in sight for the oil price war, there is little reason to believe today’s oil price rebound will last. As oil prices are likely to keep falling or remain low, the oil-correlated Canadian Dollar (CAD) is likely to see continued weakness.
This means that unless the Pound’s (GBP) own weakness intensifies, GBP/CAD has a chance of recovering.
The Pound could see fresh weakness if the UK government’s coronavirus response escalates further. Any further signals of eased monetary policy from the Bank of England (BoE) could also pressure Sterling.
On the other hand though, if investors become impressed with the government’s measures or fiscal policy plans, the Pound could strengthen.
Either way, continued weakness in the Canadian Dollar means that the Pound to Canadian Dollar (GBP/CAD) has a chance of advancing further in the coming sessions.