Record US Unemployment Claims Send Pound Canadian Dollar (GBP/CAD) Exchange Rate Higher

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as 32.9 Million Americans Collect Unemployment Benefits

UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate edged 0.5% higher on Thursday. This left the pairing trading at around CA$1.7127.

Sterling rose against the Canadian Dollar, still benefitting from the British Chancellor’s plans to support the economy.

The ‘Loonie’ continued to slide against GBP despite data showing Canadian housing starts rose more than expected last month.

Housing starts increased by 8.3% in June, however, this did little to buoy CAD as concerns over oil demand sent US crude oil futures down -1%.

Risk sentiment suffered losses after US jobless claims remained at extraordinarily high levels. Added to this, a record 32.9 million Americans were collecting unemployment benefits during the third week of June.

This weighed on risk appetite and sent traders flocking back to safe-haven assets such as the US Dollar (USD).

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted as Coronavirus Outweighs Recovery in US Oil Demand

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat on Thursday. This left the pairing trading at around CA$1.7058.

The Canadian Dollar was left flat during today’s session as renewed worries about coronavirus cases outweighed signs of recovery in US oil demand.

According to Tamas Varga at PVM Oil Associates:

‘It’s rangebound due to worries about a second coronavirus wave versus strong stock markets, especially in China, while US gasoline data also prevents oil prices from falling […] support will disappear after this week as coronavirus cases are surging in several US states.

‘A downside break-out is more likely […] and the resumption of Libyan exports, if it goes ahead, would be another bearish development.’

The spike in coronavirus cases in several states in the United States raised the prospect of fresh lockdown restrictions. This would delay the recovery in oil demand and has weighed on oil prices this week.

Data showed that US demand was falling in areas that had re-established lockdowns, although on the East Coast, demand was recovering well.

Added to this, Libya has been blockaded since the start of the year. The country is attempting to resume exports after the state oil firm lifted force majeure at Es Sider terminal on Wednesday. Although a tanker was prevented from entering the port.

Sterling (GBP) Flat on ‘Delayed Response’ to Sunak’s Mini Budget

The Pound remained flat against the ‘Loonie’ as markets showed a delayed reaction to Britain’s Finance Minister, Rishi Sunak’s new plans to support the economy.

Sunak promised to put an additional £30 billion into the economy in order to boost growth after the coronavirus-led recession.

The chancellor announced a range of schemes which included cutting VAT for the hospitality sector and bonuses for those brining furloughed workers back to work.

According to Stephen Gallo, European head of the FX strategy at BMO Financial Group:

‘There has been a little bit of a delayed response, I think, to the fiscal story here in the UK.

‘If it weren’t for the Brexit factor, which is holding down the pound, I think the pound would be significantly higher now because the UK has a much more dynamic fiscal story than the eurozone as a whole.’

However, Rishi Sunak also said it was too early to tell how quickly the economy would recover from a recession.

Sunak said:

‘It’s too early to tell… we won’t know the exact shape of (the) recovery for a little while.

‘I am absolutely anxious about the state of the economy. We are… entering into a very significant recession, we know that that is happening.’

Although, GBP remained flat as Brexit risks continued to plague the currency and limited any gains. Brexit negotiations kicked off again on Tuesday as Brussels and London began talks again.

Pound Canadian Dollar Outlook: Will Canadian Home Starts Buoy CAD?

Looking ahead to this afternoon, the Canadian Dollar (CAD) could edge higher against the Pound (GBP) following upbeat Canadian data.

If Canada’s housing starts rise higher than expected in June, showing sings of recovery after the coronavirus crisis, it will buoy the ‘Loonie’.

Meanwhile, Brexit worries could leave Sterling under pressure as negotiations between the UK and EU continue.

If traders continue to worry about the prospect of a no-deal scenario, it will send the Pound Canadian Dollar (GBP/CAD) exchange rate lower.

Millie Empson

Contact Millie Empson