Pound Canadian Dollar (GBP/CAD) Exchange Rate Extends Downturn on GBP Headwinds

GBP/CAD Continues to Plummet Ahead of New Year

(Updated 14;30, 31/12/2021) The Pound Canadian Dollar (GBP/CAD) exchange rate continues to tumbles this afternoon as the Pound (GBP) faces headwinds from mixed trading sentiment.

While initial Omicron concerns were largely dismissed on reassurances of lower death rates and hospitalisations, new warnings from the World Health Organisation (WHO) have rekindled worries of another surge.

The WHO cautions that despite milder symptoms, the Omicron variant could still overwhelm healthcare systems on account of its contagiousness:

‘A rapid growth of Omicron … even if combined with a slightly milder disease, will still result in large numbers of hospitalisations, particularly amongst unvaccinated groups, and cause widespread disruption to health systems and other critical services.’

Original article continues below:

Pound Canadian Dollar Exchange Rate Falls on Stronger WTI

The Pound Canadian Dollar (GBP/CAD) exchange rate fell this morning from a three-month high, as oil prices remained high and the Pound (GBP) suffered amidst quiet trading conditions.

At the time of writing, GBP/CAD is trading at C$1.7206, virtually unchanged from today’s opening levels.

Canadian Dollar (CAD) Benefits from Oil Dynamics

The Canadian Dollar (CAD) climbed against the Pound this morning, before coming to trade in a mixed range against its peers. The ‘Loonie’ found support amidst stronger oil prices and a predominantly risk-on mood.

Canada’s main export item added 0.05% intraday though the early Asian session, revisiting the five-week top achieved on Thursday. Oil demand continues strong on hopes of fewer health emergencies due to the South African Covid-19 variant.

News of Omicron’s milder symptoms and the relatively low number of related hospitalisations and deaths has prompted an upbeat market mood, also supporting the risk-sensitive Canadian Dollar. Several major governments have refrained from enforcing lockdown rules around year-end celebrations.

However, risk-off currencies may face headwinds ahead if geopolitical tensions escalate, potentially souring market sentiment.

Iran’s space launch has derailed previous optimism concerning the country’s denuclearization deal, while Russian leader Vladimir Putin has warned that an escalation of tensions over Ukraine could rupture relations between Russia and the US.

Pound (GBP) Wavers on Lack of Data

The Pound is trading in a narrow range against its peers this morning as a lack of significant data limits Sterling gains. As markets and political leaders focus on the achievements of 2021 however, trading sentiment is largely upbeat.

According to UK Prime Minister Boris Johnson, Britain is in an ‘incomparably better’ position in the fight against Covid than it was at the end of 2020; Labour leader Sir Keir Starmer has echoed Johnson’s sentiments, but cautions that the virus remains a real threat.

The politicians’ comments come despite another record number of coronavirus cases in the UK. In the latest 24-hour period, 189,213 positive cases were diagnosed – a fresh record high in the pandemic, according to government data.

However, investors appear to be focusing on the positives. Buoying trading sentiment alongside milder Omicron symptoms is news that UK spending during the year was almost 6% higher than in 2019. Spending on essential items rose by 11% in 2021, largely driven by supermarket shopping and home entertainment.

GBP/CAD Exchange Rate Forecast: Fresh Data to Influence Trading?

Looking ahead, both the UK and Canada are scheduled to release a clutch of new data in the first week of 2022.

Canada’s trade surplus is expected to have declined, potentially exerting CAD headwinds, while UK construction, services and manufacturing activity all look to have decreased. Likewise, this could prompt Sterling losses.

Meanwhile, oil dynamics and Covid updates are likely to influence the Pound Canadian Dollar exchange rate, with WTI gains applying probable downside and Covid fears buoying the comparatively risk-on Pound.

Olivia Evershed

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