The Pound Canadian Dollar exchange rate held steady this morning after Goldman Sachs predicted an ‘upside’ to oil prices, with forecasts for the summer hitting $80 per barrel. Consequently, the commodity-correlated ‘Loonie’ has benefited from upbeat forecasts for oil prices in the months ahead.
What’s Been Happening: Falling Oil Prices Weigh on CAD
The GBP/CAD exchange rate edged steadily higher last week as falling oil prices limited the appeal of the commodity-linked Canadian Dollar.
OPEC+’s agreement to boost oil output reduced the prices of crude, sparking concerns for Canada’s heavily oil-reliant economy.
John Kilduff, a partner at Again Capital in New York, commented:
‘[F]or now, the additional barrels are seen as enough to deflate and kill the recent rally.’
Rising concerns over the spread of the Delta coronavirus variant also dampened risk sentiment last week. This held back demand for the ‘Loonie’ as the outlook for the global economy hung in balance.
The latest UK BRC retail sales data for June undershot forecasts of 24% but grew by 6.7% – their strongest quarter on record.
Helen Dickinson, chief executive of the British Retail Consortium (BRC), said the ‘gradual unlocking of the UK economy encouraged a release of pent-up demand built up over previous lockdowns.’
GBP also rose against CAD – hitting highs of around CA$1.75 – as confidence grew in the UK economy ahead of the July 19 lifting of lockdown measures.
Three Things to Watch Out for This Week
- UK Covid-19 Developments
If the UK’s daily cases of Covid-19 infections and hospitalisations rise, then we could see demand for GBP slide on concerns over another lockdown.
- Oil Prices
CAD investors will continue to monitor forecasts for oil prices this year. Any upgrade in forecasts would be Canadian Dollar-positive.
- Flash UK PMI Data
Friday will see the release of the flash UK services and manufacturing PMI data. Will an improving outlook for the nation’s economy buoy-up the Pound?
Pound Canadian Dollar Forecast
The GBP/CAD exchange rate could fall this week if confidence in oil markets returns, buoying demand for the commodity-correlated ‘Loonie’.