Pound to Canadian Dollar Exchange Rate Slides amid Canadian Fiscal Stimulus
Despite the Canadian Dollar’s (CAD) broad weakness recently, the Pound (GBP) is the loser of the Pound to Canadian Dollar (GBP/CAD) exchange rate this week so far. As Britain’s coronavirus outlook worsens, the Pound is seeing deeper and deeper losses.
This week’s GBP/CAD movements look a little similar to last week’s. After opening this week at the interbank level of 1.69, GBP/CAD briefly edged higher before sliding last night.
As the time of writing, GBP/CAD is trending close to a 5-month-low of 1.66. Over two cents below the week’s opening levels, this is the worst level for the pair since October 2019.
The Canadian Dollar remains highly sensitive to the oil price outlook amid the virus pandemic and oil price war. However, the latest fiscal stimulus news from Canada’s government has helped CAD to rebound from its worst levels.
Pound (GBP) Exchange Rates Highly Unpopular as Investors Avoid Risks
The Pound’s (GBP) outlook has been jittery for quite some time due to Brexit uncertainty. This is perhaps among the reasons it is being hit so hard by the market’s panic over the coronavirus pandemic.
Investors continue to sell the Pound en masse against even fairly weak currency rivals like the Canadian Dollar. This is because of uncertainty over the UK government’s handling of the pandemic, as well as investors selling the Pound in favour of currencies with more liquidity.
According Morten Lund, FX Strategist at Nordea:
‘I’ve been very negative on Sterling throughout all this and I don’t think this general market sell-off is over.
There are not many out there that want Sterling as a reserve currency, and at the moment everyone wants to be long safe assets including Dollars.’
Market speculation that there may be more easing from the Bank of England (BoE) on the way is also keeping pressure on the Pound’s appeal.
Canadian Dollar (CAD) Exchange Rates Cool from Canadian Government’s Stimulus
The Canadian Dollar’s (CAD) broad selloff is seeing something of a pause today. While the ongoing coronavirus pandemic and oil price war remain considerable downside factors, CAD is rebounding slightly from its worst levels.
The Canadian Dollar is a little more appealing after Canada’s government ramped up fiscal policy plans last night. The Canadian government announced emergency aid for those made to self-isolate due to the virus.
On top of this, help has been pledged to boost Canada’s oil industry amid the oil price rout seen in recent months. This is further boosting CAD appeal.
Speculation for more easing from the Bank of Canada (BoC) is limiting CAD demand slightly though. Yesterday, BoC Governor Stephen Poloz said the bank was ready to provide markets with further liquidity if needed.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Investors Carefully Watching Stimulus
For now the Pound to Canadian Dollar (GBP/CAD) exchange rate is a little weaker as the Canadian Dollar (CAD) rebounds from its latest plummet.
However, with coronavirus and oil concerns still weighing heavily on CAD, the pair could rebound from its lows soon if the currency sees a fresh selloff.
If Canadian stimulus doesn’t do enough to offset oil price war concerns, the Canadian Dollar is likely to keep falling. Still, if continued fiscal stimulus from Canada’s government impresses investors, the Canadian Dollar could strengthen instead.
On the other hand, the Pound (GBP) may also be in for a rebound in demand soon. As Sterling has hit decade lows against some major currencies like the US Dollar (USD), it is more likely to rebound.
Sterling could rebound more easily if the UK government ramps up its own stimulus plans. This could help the Pound to Canadian Dollar (GBP/CAD) exchnage rate to sustain a recovery from 5-month-lows.