Pound Canadian Dollar Exchange Rate Struggles to Hold 10-Month-Best as Oil Prices Rise

Pound Canadian Dollar Exchange Rate Remains Appealing but Advances Slow 

The Pound (GBP) remains one of the most appealing major currencies on the market, but the Pound Canadian Dollar (GBP/CAD) exchange rate is struggling to hold this week’s best levels. The Canadian Dollar (CAD) remains resilient amid oil price strength. 

Broad Pound strength has helped GBP/CAD to advance gradually in recent weeks. Last week saw GBP/CAD climb from the interbank level of 1.75 and gain over half a cent. 

While GBP/CAD has been unable to hold last night’s best level since May 2020, the pair still trends above the key interbank level of 1.76 at the time of writing on Wednesday. 

Investors are now awaiting key UK and Canadian retail sales data due at the end of the week for the pair’s next potentially big shifts in movement. 

Pound (GBP) Exchange Rates Benefit from Solid Inflation Rate Report 

Sterling continues to benefit from broad market expectations that Britain’s economy will recover from the coronavirus pandemic before some other major economies do. 

The UK continues to vaccinate its population at a steady rate, with over 23% of civilians having at least one dosage of the vaccine so far. 

On top of coronavirus recovery hopes though, the Pound is also being supported by signs of resilience in Britain’s economy. Today’s UK inflation rate report indicated that domestic price pressures are weathering the pandemic better than expected. 

Canadian Dollar (CAD) Exchange Rates Resilient as Oil Prices Keep Climbing 

The Canadian Dollar has been hit by a dip in market sentiment this week. As investors react to a stronger US Dollar (USD), currencies more correlated to trade like the Canadian Dollar have been less appealing. 

However, the Canadian Dollar is holding above lows. Losses in the Canadian Dollar are limited due to persistent strength in prices of oil, Canada’s biggest export. 

The Canadian Dollar is often correlated to oil prices, so strong oil forecasts are boosting CAD. 

Oil prices are rising on expectations for higher demand, as markets show more signs of recovering from the coronavirus pandemic. According to Warren Patterson at ING: 

‘For 2021 we see oil demand growing by a little more than 6.5mln bpd, after having fallen by a little over 10mln bpd in 2020, 

Q2 of 2021 should be the quarter where we see the strongest year-on-year growth at around 14mln bpd, but this obviously reflects the low base in Q2 2020, when demand bottomed as a result of Covid-19 lockdowns.’ 

Pound Canadian Dollar (GBP/CAD) Exchange Rate Awaits Key Retail Sales Results 

The Pound to Canadian Dollar exchange rate may struggle to climb much higher without a fresh boost in the Pound’s outlook. 

As a result, Pound investors are looking ahead to Friday’s session, when key UK retail sales and PMI projections will be published. 

If Britain’s data beats forecasts it will make markets more confident about the UK economy’s potential to recover strongly from the coronavirus pandemic. This will keep the Pound appealing. 

However, poor UK data could have the opposite and may knock bullishness out of the Pound instead. 

Friday will also see the publication of Canada’s own retail sales results. 

Canadian data has been mixed lately, so if Canadian retail stats disappoint or Canada’s coronavirus situation worsens the Pound Canadian Dollar (GBP/CAD) exchange rate is more likely to hold near its best levels. 

Josh Jeffery

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