GBP/CAD Exchange Rate Rises, Sinking Oil Prices ‘The Driving Factor’ for Weak Canadian Dollar
The Pound Canadian Dollar (GBP/CAD) exchange rate rose today as the oil-sensitive ‘Loonie’ continues to suffer from sinking oil prices, after this week opened with prices falling to as low as $20 per barrel. The pairing is currently trading around CA$1.759.
Mark Chandler, the Head of Canadian Fixed Income at RBC Capital Markets, said that oil prices had remained ‘the driving factor’ for the Canadian Dollar’s weakness at the beginning of this week.
The Canadian economy is also taking a big hit from the coronavirus, with the Conference Board of Canada expecting worst to come if the nationwide lockdown continues until the end of August.
The Conference Board of Canada, based in Ottawa, also predicted that Canada’s GDP could fall by 1.1% this year.
The Canadian Dollar (CAD) found no relief from Canadian President Justin Trudeau’s recent C$202 billion stimulus package to bolster the Canadian economy though the crisis. Instead, ‘Loonie’ traders are eyeing the dwindling oil prices and uncertainty over global trade.
The Pound (GBP) Rises Despite Gloomy UK Economic Predictions
The Pound (GBP) edged higher today despite the Centre for Economics and Business Research (CEBR) prediction that the coronavirus could shave at least 15% of the UK’s economy growth in the second quarter.
Today also saw the release of the UK’s GDP figure for the fourth quarter, which stagnated at 0% even before the coronavirus took hold of the British economy.
Ruth Gregory, an economist with Capital Economics, was also downbeat about the UK’s economic outlook, saying:
‘Overall, we think the coronavirus will deliver a hit to economic activity well in excess of the 6% fall in the financial crisis and the 8% drop in the Great Depression.’
‘And while we assume that GDP will recover fairly quickly in the second half of 2020, it may be a few years before the economy reaches the level it would have done had the coronavirus shock not happened.’
The Pound (GBP) has remained under pressure today as UK analysts predict an intensification of lockdown from Downing Street.
If these expectations are confirmed, we could see the British economy encounter further difficulties as businesses are challenged by the Government’s measures to curb the spread of the coronavirus.
GBP/CAD Outlook: Could a Weak UK Manufacturing PMI Clip Sterling’s Gains?
Sterling investors will be awaiting tomorrow’s release of the final Markit Manufacturing PMI for March. If the figure sinks any deeper into contraction territory, we could see the Pound lose some of its gains against the ‘Loonie’.
Tomorrow will also see the publication of Canada’s Markit Manufacturing PMI for March, which is expected to rise from 51.8 to 53.3.
Consequently, we could see the Canadian Dollar rise as its largest sector shows some improvement despite this month’s onset of the coronavirus pandemic.
The GBP/CAD exchange rate will continue to be driven by coronavirus developments. Any signs of the UK government initiating further draconian measures to flatten the curve of Covid-19 cases would prove Pound-negative.