Pound Canadian Dollar (GBP/CAD) Exchange Rate Edges Higher as Canadian GDP Tumbles

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as Canadian Spending Suffers Record Fall

UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate edged up by around 0.3% this morning. This left the pairing trading at around CA$1.7015.

The Canadian Dollar retreated on Friday afternoon after a flash estimate suggested the country’s growth contracted by a record -11%.

In a flash estimate, GDP plummeted by a record -11% between March and April as sections of the economy were shut down by the coronavirus.

In March, data showed GDP plummeted by -7.2%, making this the worst month-on-month fall ever. Added to this, further data showed quarter-on-quarter, growth contracted by -2.1%.

In a commentary, Statscan noted:

‘The March and April decreases are likely to be the largest consecutive monthly declines on record.’

Further data showed household spending in the first three months of 2020 fell by -2.3%. This was the steepest fall on record as consumers stayed away from clothing and footwear stores.

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Slides despite Falling Oil Prices

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped by around 0.3% this morning. This left the pairing trading at around CA$1.6925.

The oil-sensitive ‘Loonie’ was able to edge higher against the Pound on Friday despite oil prices falling.

Oil prices are set to post the first weekly fall in over five weeks after US inventory data revealed weaker fuel demand from the world’s largest oil consumer.

Added to this, deteriorating relations between the US and China also weighed on market sentiment.

According to OCBC economist Howie Lee:

‘The rally needs a breather. It has been four weeks of gains and the market needs to buy time for downstream prices to catch up.

‘Beyond the short term, the bullish momentum still looks rather intact.’

Meanwhile, traders will be focused on the outcome of OPEC+ talks over output cuts. Saudi Arabia and some OPEC members are considering extending the record production cuts of around 9.7 million barrels per day beyond June. However, they have not secured support from Russia.

Sterling (GBP) Falls as Negative Rates and Brexit Send Traders Fleeing

The Pound slumped on Friday as post-Brexit talks and speculation of negative interest rates continued to plague the currency.

Brexit worries have continued to weigh on the British currency, and reports have suggested talks between the UK and EU have not gone well.

With the deadline quickly approaching on a Brexit transition period, GBP has remained under pressure.

Thursday saw the bloc’s chief Brexit negotiator, Michel Barnier call on Britain to be more realistic if it wants to secure a deal with the EU.

Meanwhile, negative rate speculation continued to dampen Sterling sentiment. Bank of England (BoE) chief economist, Andy Haldane noted the bank was not close to taking rates below zero.

However, markets are already pricing this scenario in.

Added to this, worries about a coronavirus-induced recession have weighed on the currency. Prime Minister Boris Johnson’s announcement of further lockdown easing from next week was not enough to boost GBP.

The mood was also dampened after BoE policymaker, Michael Saunders said the country’s economy is unlikely to recover fully in the next two to three years.

Pound Canadian Dollar Outlook: Canadian Growth Data in Focus

Looking ahead to this afternoon, the Canadian Dollar (CAD) could give up some of this morning’s gains against the Pound (GBP).

If Canada’s Q1 growth plummets further than expected as the coronavirus hit the economy, it will weigh on the ‘Loonie’.

Meanwhile, traders will also likely be focused on increasing tensions between the United States and China.

If Washington’s response to China’s security law on Hong Kong spooks traders, the Pound Canadian Dollar (GBP/CAD) exchange rate could be left flat as traders move away from riskier assets such as GBP and CAD.

Millie Empson

Contact Millie Empson