GBP/CAD Exchange Rate Rises as Canadian Dollar Shrinks on US-Canadian Border Tensions
The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.7% today as the oil-sensitive ‘Loonie’ continues to be dragged down by prospects of worsening demand for oil.
Oil prices seem to have ignored the recent bout of market optimism following the US Federal Reserve’s announcement of its essentially unlimited quantitative easing programme. Instead, fears about oil demand and storage capacity have limited the price of Canada’s most valuable commodity.
The Canadian Dollar (CAD) has also come under pressure from souring relations between the US and Canada, after Canada lashed out against the US’ proposal to deploy troops across the undefended US-Canadian border to prevent the spread of the coronavirus.
Canadian Deputy Prime Minister Chrystia Freeland commented on the controversy:
‘Canada is strongly opposed to this U.S. proposal and we have made that opposition very, very clear … this is an entirely unnecessary step which we would view as damaging to our relationship.’
‘The public health situation does not require such action.’
The economic outlook for Canada continues to look grim, and with the nation’s economy being particularly reliant on external trade, the coronavirus pandemic threatens to severely limit the value of the risk-sensitive Canadian Dollar.
Pound (GBP) Edges Higher Despite UK Economy’s Woes
The Pound (GBP) has benefited from rising investor sentiment after yesterday saw the Bank of England (BoE) hold its interest rates at an all-time record low. However, Sterling will remain sensitive to global and domestic economic developments as the coronavirus continues to ravage businesses worldwide.
GBP investors are also concerned over the fact that UK-EU trade negotiations have been suspended indefinitely due to the coronavirus pandemic. This has exacerbated an already highly uncertain economic outlook for Britain and weighed on some of the Pound’s gains.
Today also saw the publication of February’s UK car production figure, which fell by -0.8 and raised concerns over the nation’s car production following the coronavirus outbreak.
Mike Hawes, The Society of Motor Manufacturers and Traders’ (SMMT) chief executive, was downbeat in his analysis, saying:
‘We wholeheartedly welcome government’s extraordinary package of emergency support for businesses and workers, but this must get through to businesses now. If we’re to keep this sector alive and in a position to help Britain get back on its feet, we urgently need funding to be released, additional measures to ease pressure on cashflow and clarity on how employment support measures will work.’
With the UK’s economic future looking increasingly grim, we could see the GBP/CAD exchange rate begin to shed some of its gains ahead of the weekend.
GBP/CAD Forecast: Sinking Oil Prices Could Weigh on the Canadian Dollar
Sterling traders will be awaiting Monday’s release of the UK GfK consumer confidence report for March. If this confirms consensus and shrinks to -14, we will see the GBP lose some of its gains against the Canadian Dollar.
Next week will also see GBP investors pay close attention to the UK’s economic developments as it enters its second week of lockdown. Any further signs of an encroaching recession would considerably weigh on the GBP/CAD exchange rate.
The Canadian Dollar (CAD) will remain sensitive to oil prices. If these continue to decrease, we will see the oil-sensitive ‘Loonie’ begin to drop against many of its peers.