GBP/CAD Exchange Rate Climbing as Canadian Dollar Slips from Highs
A combination of weaker oil prices and profit-taking are helping the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate to advance today. This is despite today’s broadly concerning UK data.
GBP/CAD has seen broadly mixed movement since opening this week at the interbank level of 1.73. After climbing for half a week, GBP/CAD plummeted to a new weekly low of 1.72.
Since touching that low though, GBP/CAD has been firming higher again. While GBP/CAD has been unable to return to this week’s high of 1.74, the interbank level is less than half a cent below these highs at the time of writing.
Pound (GBP) Exchange Rate Strength Limited by Gloomy UK Data
The Pound (GBP) may have seen even stronger gains against the Canadian Dollar (CAD) today, if not for some disappointing UK ecostats.
Both Britain’s December retail sales results and January PMI projections came in well below expectations today. They indicated that Britain’s economic activity is struggling more from the coronavirus pandemic than hoped.
With the coronavirus infection rate not falling as much as hoped, analysts are concerned that Britain could be in for months more lockdown. According to Allan Monks, Economsit at JPMorgan:
‘Thinking from the government seems to be leaning towards delaying an easing until April. The picture could yet change, but we are lowering our 1Q GDP forecast from -3.6% to -4.1%q/q (i.e. from -13.5% to -15.5% annualized) in expectation of a post-Easter easing. This is a delay of around a month, and would leave the recovery from 2Q broadly intact.’
Canadian Dollar (CAD) Exchange Rates Sold from Highs as Oil Prices Tumble
While market sentiment improved in recent sessions, the risk and trade-correlated Canadian Dollar did fall from its highs today.
This was partially due to the currency’s rally pausing for breath, but also due to fresh losses in oil prices.
As oil is Canada’s biggest export, the Canadian Dollar is often correlated to oil prices. According to Stephen Brennock at PVM, rising coronavirus cases in China are weighing on oil demand hopes:
‘The biggest source of concern for the energy complex right now is rising coronavirus cases in China. This will dampen the near-term consumption outlook in the world’s epicentre for global oil demand growth.’
Pound to Canadian Dollar (GBP/CAD) Exchange Rate May Struggle to Hold Ground
While the Pound to Canadian Dollar exchange rate is rising today, the pair may not have much space to advance over the coming week.
The Pound could continue to be weighed by concerns over more coronavirus restrictions and economic weakness in Britain. Meanwhile, improving market sentiment could continue to boost the Canadian Dollar.
Next Tuesday will see the publication of Britain’s November job market results. If UK jobs were better than expected and there are signs the UK coronavirus situation is improving, this is the best chance the Pound has of mounting a stronger recovery.
However, if these stats disappoint or market sentiment continues to rise, the Canadian Dollar could be the stronger of the two next week.
If oil prices begin to rise again on global recovery hopes, or US fiscal stimulus developments impress investors, the Canadian Dollar could benefit from market sentiment and rise.
Key Canadian data, including weekly earnings on Thursday and growth rate results on Friday, could also influence the Pound to Canadian Dollar (GBP/CAD) exchange rate.