GBP/CAD Exchange Rate Rangebound as UK Inflation Highlights UK’s Economic Strife
The Pound to Canadian Dollar (GBP/CAD) exchange rate held steady this morning, with the pairing currently trading around CA$1.747.
Sterling struggled against many of its peers today after March’s UK CPI figure confirmed consensus and fell from 1.7% to 1.5%.
However, some analysts saw this as indicating the extent of the nation’s economic strife last month.
Richard Pearson, the Director of the investment platform EQi, commented:
‘Inflation is key indicator for future economic growth and this morning’s figures, covering March, start to paint a picture of potential damage to come for the UK. But the worst is likely yet to come in next month’s numbers.’
Today also saw Andrew Bailey, the Governor of the Bank of England (BoE), warn of further economic damage if the nation’s lockdown were to be lifted prematurely.
As a result, Sterling traders are becoming anxious that the lockdown, if extended further, could cause additional damage to the British economy.
Canadian Dollar (CAD) Steady Despite Historic Two-Day Oil Price Plunge
The Canadian Dollar (CAD) failed to gain on Sterling following yesterday’s storage concerns pummeled oil prices, sending the Western Texas Intermediate (WTI) crude May deliveries into negative territory for the first time ever. As a result, crude fell to just -$36.20 a barrel.
Oil prices have come under renewed pressure today after the historic two-day price plunge.
Consequently, this has left markets and risk-sensitive currencies struggling with the enormous glut amid the ongoing coronavirus crisis.
Robert Carnell, the head of research at Asia Pacific, was downbeat in his forecast, saying:
‘It highlights that yesterday was not a one-day blip, but a problem that is going to need to be dealt with and priced in until US oil supply drops enough to eat into the supply glut, or demand recovers sufficiently to do the same.’
With Canada being primarily an oil-based economy, the notion that oil prices could continue to fall is weighing on the risk-sensitive ‘Loonie’.
In other Canadian economic news, today will see the release of the Bank of Canada’s (BoC) CPI figure for March. If this significantly falls below 1.8%, then we could see the Canadian Dollar fall as anxieties over the nation’s economy continue to grow.
GBP/CAD Forecast: Could Sterling Sink on a Downbeat UK Services PMI?
Pound (GBP) investors will be looking ahead to tomorrow’s release of April’s UK Markit Services PMI.
If the UK’s largest sector severely contracts due to the coronavirus, then we could see Sterling plummet against the Canadian Dollar.
Sterling traders will also be keeping a close eye on the UK’s coronavirus developments this week. If there are any increases in infections of fatalities, then we could see the GBP/CAD exchange rate suffer.
However, with the Canadian Dollar (CAD) sensitive to oil prices, any further drops in the price of crude would send the ‘Loonie’ on a downward spiral.
Consequently, the Pound would capitalise on the Canadian currency’s weakness this week.