The Pound Canadian Dollar exchange rate held steady today following comments from Downing Street that a falling in Covid-19 infections had been ‘encouraging’. However, Number 10 also warned that the impacts of the 19 July unlocking of coronavirus restrictions had not been reflected in recent data.
What’s Been Happening: Falling Oil Demand Limits ‘Loonie’
The Pound Canadian Dollar exchange rate rose last week as a slump in oil prices resulted from rising concerns over the spread of Covid-19 variants, with some countries recording record daily increases and extending lockdown measures.
As a result, slowing demand for oil weighed on the commodity-linked Canadian Dollar.
Analysts at BMO Capital Markets commented:
‘[T]he widespread rise in new Delta cases is to drum home the point that the pandemic will be with us for some time yet, and the recovery in international travel will be more protracted.’
Friday also saw the release of May’s Canadian retail sales data for May, which fell by -2.1% month-on-month.
Sterling rose against the ‘Loonie’ despite the latest flash UK PMI data showing a slowdown in both the services and manufacturing sector in July.
However, the Pound continued to benefit from the lifting of lockdown restrictions on July 19, which buoyed confidence in the nation’s economic recovery in the months ahead.
Three Things to Watch Out for This Week
- UK Covid-19 Developments
Pound traders will monitor Covid-19 infection rates and hospitalisations. If these continue to fall, then Sterling would rise on renewed confidence in the nation’s economic recovery.
- Canadian Inflation Data
CAD investors will keep a close eye on Wednesday’s Canadian consumer price index for June. Could signs of a rebound in the Canadian economy see the CAD/GBP exchange rate head higher?
- Oil Prices
Oil prices will continue to dictate movement for the commodity-linked ‘Loonie’ this week. If Covid-19 infections continue to spread globally, then demand for oil could fall and drag down the Canadian Dollar.
Pound Canadian Dollar Forecast
The GBP/CAD exchange rate could head higher this week if daily UK Covid-19 infections continue to fall. However, any signs of the lifting of lockdown restrictions having a negative impact on the nation’s coronavirus situation would be Pound-negative.