GBP/CAD Exchange Rate Ticks Up this Morning as UK Covid Cases Decline
The Pound Canadian Dollar (GBP/CAD) exchange rate has trended up today as the UK reports a fall in domestic Covid cases for the fifth consecutive day. A drop in oil prices has exerted downside pressure on the Canadian Dollar (CAD).
At the time of writing, the Pound (GBP) trades at CAD$1.7308, up 0.4% from opening levels.
Pound (GBP) Rises on Lowering Covid Case Numbers
The Pound (GBP) has benefitted this morning from a fall in coronavirus cases, for the fifth day in a row.
Experts have warned that the effects of ‘Freedom Day’ have yet to be reflected in virus statistics – two or three weeks are needed to get a clear picture of what’s happening – but the downtrend is encouraging.
Paul Hunter, professor of medicine at the University of East Anglia, is optimistic:
‘If I was a betting man, I would now say that the impact of 19 July will not be sufficient to start case numbers increasing again, but I cannot be certain’, he said.
While health officials want to see persistently falling case numbers, markets may move forward already, and the Pound could get another boost on the Bank of England (BoE)’s speech later today.
Last week’s speech by Deputy Governor Ben Broadbent struck a dovish tone as the policy maker argued:
‘I’m not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18-24 months ahead, the horizon more relevant for monetary policy’.
If Gertjan Vlieghe takes a more hawkish angle today, market sentiment is likely to support Sterling: while an extension of Broadbent’s cautious approach may threaten the Pound’s current upturn.
Canadian Dollar (CAD) Drops as Oil Prices Fall
The Canadian Dollar has fallen against several of its peers today as oil prices drop on surging Covid cases in Asia and floods in China, both threatening the commodity’s demand growth prospect.
WTI crude futures fell toward $71 a barrel after 4-day rally yesterday, the prospect of higher demand alongside vaccination rollouts dampened by the renewed spread of the virus. Covid-19 infections globally increased the most in the past two months as the delta variant wreaks havoc.
According to Vandana Hari, founder of energy consultant Vanda Insights in Singapore:
‘The delta variant continues to hang over the demand recovery; it may take some time for the oil bulls to recover their confidence.’
The latest virus flare-up has coincided with a salvaged OPEC+ agreement to bring more oil to the market from August, whipping up stiff headwinds for Canadian oil producers and interrupting a price rally.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Forecast: CAD to Pick Up on Inflation Expectations?
Looking ahead, analysts consider that the Pound could rise further, if Covid cases in the UK continue to drop and the market mood remains calm.
The trajectory of the oil-sensitive ‘Loonie’ is less predictable, as trading remains stifled by a multitude of factors. As Covid surges across the U.S. and low levels of vaccination in most Southeast Asian nations lead to more infections, support for the currency will likely remain depressed on lower oil demand.
Canada’s Consumer Price Inflation (CPI) release on Wednesday, however, may recoup some gains for the currency if figures meet expectations. Inflation quickened to 3.6 percent in May of 2021 from 3.4 percent in April and is predicted to settle this week at 3.2 percent.