Pound Canadian Dollar Exchange Rate Limited by Slowing Sterling Rally
Movement in the Pound Canadian Dollar (GBP/CAD) exchange rate has been mixed in recent sessions. Investors may be hesitant to keep buying the Pound (GBP) as it is weighed by coronavirus lockdown concerns.
After opening last week at the interbank level of 1.75, GBP/CASD spent the week climbing. GBP/CAD was unable to hold Friday’s best levels but the pair still closed the week almost a cent higher in the region of 1.76.
Today, GBP/CAD was once again attempting to rally. At the time of writing on Monday afternoon, GBP/CAD trended near a high of 1.77, which was the best interbank level for the pair in almost a year.
Sterling could fall in the coming sessions if UK data fails to impress, while the Canadian Dollar (CAD) finds support in stronger commodity outlooks.
Pound (GBP) Exchange Rate Rally Slows as Markets Await Restriction Roadmap
The Pound’s bullish movement has slowed a little since markets opened this week. Following morning reports, investors are preparing for a more cautious than hoped stance on the reopening of Britain’s economy.
Reports suggested that lockdown will be eased in phases with gaps of five weeks between each. This was slower than markets had hoped, and this weighed on the Pound’s appeal today.
Yohay Elam, Analyst at FXStreet, said that this may soften the potential need for another lockdown down the line:
‘The promise of a slow exit from the lockdown is that it will allow vaccinating more people and also diminish the chances of having yet another shuttering of the economy’
Canadian Dollar (CAD) Exchange Rate Outlook Supported but Movement Mixed
The Canadian Dollar has been unable to capitalise on a slightly weaker Pound today, despite higher market demand for currencies correlated to risk and trade.
The Canadian Dollar is a commodity-correlated currency. Support for the currency has been boosted by a recent rise in commodity demand and expectations for global reflation.
According to Analysts at ING:
‘Idiosyncratic factors are contributing to put a floor below CAD: the improved outlook for the US economy (thanks to encouraging economic data and vaccination figures), on which Canada heavily relies on, and WTI staying around$60/bbl, despite Thursday’s short-lived sell-off’
Pound Canadian Dollar (GBP/CAD) Exchange Rate Awaits Coronavirus Developments
In the coming sessions, Pound investors are likely to digest the UK government’s plans around easing coronavirus restrictions.
An optimistic reopening roadmap would help the Pound continue its recent bullishness. However, if the government remains cautious, the Pound could shed some of its recent strength as investors reassess its recent rallies.
According to Lee Hardman, Currency Analyst at MUFG, markets might not want to buy the Pound much higher:
‘Whereas if those highs remain in place, market participants may then start to question whether recent Pound strength is overshooting and thereby increasing the risk of a correction lower.’
This will be Sterling’s focus for now, but tomorrow’s upcoming UK job market data could also be influential.
As for the Canadian Dollar, investors are awaiting a speech from Bank of Canada (BoC) Governor Tiff Macklem tomorrow.
Of course, other coronavirus and commodity developments could also influence the Pound Canadian Dollar (GBP/CAD) exchange rate in the coming sessions.