Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted as Oil Markets Brace for Storm Laura
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat, leaving the pairing trading at around CA$1.7374.
The Canadian Dollar remained muted today despite oil prices holding steady as a huge hurricane in the Gulf of Mexico moved towards the heart of the US oil industry.
Hurricane Laura has forced oil rigs and refineries to shut down production, and the threat has pushed the oil market higher this week.
Although, the tropical storm is not expected to hurt supplies as oil inventories remain high as the coronavirus pandemic has hurt fuel demand.
According to Vivek Dhar, a commodities analyst at Commonwealth Bank:
‘It really depends on the damage sustained. But there’s a huge mitigation in that [crude] stockpile levels are at their highest in decades.’
Sterling (GBP) Struggles as Car Production -21% Below 2019 Figures
Sterling struggled to make gains on Thursday morning after the latest data revealed the British public’s expectations for inflation over the next year fell in August. This is after the measure touched one of the highest levels since 2013 just a month before.
Separate data this morning also showed car production increased sharply last month. Although, this was still well below the previous year’s figures which limited GBP gains.
Data from the Society of Motor Manufacturers and Traders (SMMT) showed 51% more cars were manufactured in July compared to just a month earlier. Although this was still 21% below figures from just a year before.
Commenting on this, SMMT chief executive Mike Hawes said:
‘As key global markets continue to reopen and UK car plants gradually get back to business, these figures are a marked improvement on the previous three months, but the outlook remains deeply uncertain.’
Sterling also likely suffered some losses at the SMMT added that car production in the first six months of 2020 was the lowest since 1954.
While the data suggests the sector is bouncing back from the pandemic strongly, the SMMT warned of Brexit uncertainty.
The lack of clarity on the UK’s departure from the EU could derail the current recovery. With around 80% of cars made in Britain exported, and the majority of manufacturers use parts imported from the bloc.
‘The impact of tariffs on the sector and the hundreds of thousands of livelihoods it supports would be devastating, so we need negotiators on both sides to pull out all the stops.’
Pound Canadian Dollar Outlook: Average Earnings, BoE and Oil Prices in Focus
Looking ahead to this afternoon, the Canadian Dollar (CAD) could claw back some losses against the Pound (GBP) following the latest earnings data.
If average weekly earnings in Canada rise higher than expected in June, it will offer the ‘Loonie’ support.
A jump in oil prices during today’s session could also offer CAD an upswing of support today.
Meanwhile, Sterling investors will continue to focus on Friday’s upcoming speech from the Bank of England’s (BoE) Governor Andrew Bailey at the annual Jackson Hole symposium.
If the bank’s governor is overly dovish and hints the BoE may need to resort to negative interest rates in the near-term, it will weigh on GBP. This will send the Pound Canadian Dollar (GBP/CAD) exchange rate lower.