Pound Canadian Dollar (GBP/CAD) Exchange Rate Edges Higher
The Pound Canadian Dollar (GBP/CAD) exchange rate is steady on Friday, finishing the week near the session’s opening levels around CA$1.70.
Political uncertainty in the UK government caused by the furore over Downing Street parties has left Sterling without strong direction again today.
Meanwhile, although weakening slightly due to a risk-off mood, the Canadian Dollar continues to receive support from oil prices hovering around a seven-year high.
Pound (GBP) Lacks Support as UK PM Johnson Remains Pressured
The Pound (GBP) is struggling for direction today amid a lack of notable UK data releases and the ongoing wait for the release of the report into Downing Street parties that could determine the future of UK Prime Minister Boris Johnson.
In the latest development, the Metropolitan Police has asked for senior civil servant Sue Gray, who is leading the inquiry into lockdown parties, to make ‘minimal reference’ to events they are investigating.
The Met added it wants the report to ‘avoid any prejudice to our investigation’ and that it has not asked for ‘any limitations’ on gatherings not under investigation by the police.
Sue Gray’s report been had been widely expected for release this week, but conversations with government lawyers and the Met delayed the publication. The release of the report may now suffer a further hold up.
Amid growing calls for Boris Johnson’s resignation from opposition parties, and speculation Conservative MPs may trigger a vote of no confidence to force a leadership contest, the ongoing political uncertainty is subduing Sterling sentiment.
Meanwhile, comments from UK Foreign Secretary and lead Brexit negotiator Liz Truss on negotiations with the EU on the Northern Ireland Protocol have provided the Pound with modest support.
Truss said:
“We are making progress. We’re having constructive talks. I want to make significant progress by February. That’s important but it’s important that we secure the support of all of the communities in Northern Ireland, including the unionist community.”
Her comments come after Truss and European Commission vice-president, Maroš Šefčovič said a deal could happen by the end of February.
Canadian Dollar (CAD) Limits losses on High Crude Prices
The Canadian Dollar (CAD) is trading in a narrow range today, remaining underpinned by high oil prices but softening amid risk-off market trade.
Concerns of tight oil supply and increased demand are pushing prices higher, with WTI crude holding above $86 a barrel after touching a seven-year high on Thursday.
The threat of Russia invading Ukraine causing disruption to supply has driven oil prices up by 15% so far this year.
As Russia is the world’s second-largest oil producer, and important natural gas provider to Europe, the prospect of a conflict and sanctions continues to push prices higher.
Attacks on infrastructure in the United Arab Emirates has also heightened fears over supply disruption.
The Canadian Dollar had fluctuated in recent days on shifting oil prices, and the Bank of Canada’s (BoC) decision to leave interest rates unchanged at 0.25%.
Markets had widely priced in a rate hike to 0.5% despite many economists viewing a rise as unlikely.
However, the BoC did signal likely interest rate rises at its next policy meeting in an attempt to combat rising inflation, stoking volatility in CAD exchange rates in recent days.
Pound Canadian Dollar Forecast: UK Political Uncertainty and Oil Prices to Drive GBP/CAD
The Pound Canadian Dollar exchange rate may be set for more volatility at the start of next week.
Signs of pressure increasing on Boris Johnson and the potential for a change in leadership may stoke volatility in the Pound as the wait continues for Sue Gray’s report.
However, Sterling looks to limit losses on expectations that the Bank of England (BoE) will raise interest rates at its February policy meeting.
Meanwhile, the OPEC+ meeting on Tuesday may drive additional movement in the oil-sensitive Canadian Dollar.
Many expect the organisation to stick to planned rise in output targets in March, although the increase may not be enough to offset supply disruption which may lead to more oil price rises.
Canadian GDP data for November may weigh on the ‘Loonie’, however, as forecasts point to growth slowing to 0.3%, down from 0.8% the month before.