GBP/CAD Exchange Rate Rises as Outlook Dims for Canadian Economy on Oil Price Fears
The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.2% today, with the pairing currently fluctuating around CA$1.711.
The Canadian Dollar (CAD) fell today after the giant financial services company, HSBC, predicted that the ‘Loonie’ would weaken considerably on damped risk appetite and sinking demand for oil.
HSBC said in its statement:
‘On 15 July, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed to ease their crude production cut to 7.7 million barrels per day starting from August through December, from the existing level of 9.7mbpd. Oil prices were a little lower on 16 July, but we believe, weaker oil-related currencies, including the CAD, were likely echoing risk appetite rather than oil prices.’
As a result, CAD investors are becoming increasingly jittery on the prospect of dwindling oil prices as markets are cautious as Covid-19 cases continue to grow.
You-Na Park-Heger, an analyst at Commerzbank, was dovish about the possibility of a second-wave of coronavirus harming Canada’s slowly recovering economy.
‘Against this backdrop, the CAD is likely to continue to trend sideways for the time being. In the medium term, once the corona crisis has been overcome, we see appreciation potential for the CAD.’
Pound (GBP) Edges Higher Despite Concerns for the UK’s Retail Sector
The Pound (GBP) edged higher today despite the retail giant Marks & Spencer announcing that it would cut 950 jobs at its head office and stores as the retail sector is hit hard by the coronavirus pandemic.
Diane Wehrle, the insights director at Springboard, said:
‘Last week demonstrated that the longed for flood of shoppers returning to bricks and mortar destinations and retail stores once again became a trickle.’
Sterling has also benefited from rising hopes for Britain’s economic recovery after the Bank of England’s (BoE) governor, Andrew Bailey, said that he sees signs that the economy is recovering.
Today also saw the UK secure a deal for 90 million doses of a coronavirus vaccine. The UK Government said that this would help Britain protect those at risk to the virus.
As a result, GBP investors have become more optimistic that the UK could be getting the Covid-19 crisis under control.
GBP/CAD Forecast: Could Rising Canadian Retail Sales Boost the Loonie?
Canadian Dollar (CAD) investors will be looking ahead to tomorrow’s release of the Canadian Retail Sales figures for May. If these confirm forecasts and rise by 20%, then we could see the ‘Loonie’ rises as hopes grow for the nation’s retail sector’s recovery.
Tomorrow will also see the release of Canada’s New Hoiusing Price Index for June. Any improvement would prove CAD-positive.
The GBP/CAD exchange rate could sink tomorrow if the UK’s latest Public Sector Net Borrowing figure for June paints a grim picture of the British economy. As a result, we could see Sterling shed some of its gains tomorrow.