Pound Canadian Dollar (GBP/CAD) Exchange Rate Subdued Despite Falling Oil Prices
The Pound Canadian Dollar (GBP/CAD) exchange rate is rangebound in midweek trade as concerns over the UK’s growth outlook subdues Sterling.
Meanwhile, CAD exchange rates are under significant pressure due to falling oil prices weighing on the oil-sensitive ‘Loonie’, leaving GBP/CAD trading around CA$1.7216 at the time of writing.
Pound (GBP) Struggles as Report Highlights Brexit Impact on UK Firms
The Pound (GBP) is trading in a narrow range today amid a lack of significant UK data or developments to provide support.
Investors appear to be holding bets ahead of UK GDP growth data released on Friday, as concerns linger over the threat of a cost-of-living crisis weakening the UK’s economic growth outlook.
Reports today that the only impact of Brexit on UK firms is detrimental has added to growth concerns and contributed to limiting GBP exchange rates.
According to UK MPs on the Public Accounts Committee (PAC), UK businesses could be hit harder this year due to new import controls.
The report also warns of the increasing bureaucratic burden on businesses, with the PAC chair Meg Hillier stating:
“One of the great promises of Brexit was freeing British businesses to give them the headroom to maximise their productivity and contribution to the economy – even more desperately needed now on the long road to recovery from the pandemic.
“Yet the only detectable impact so far is increased costs, paperwork and border delays.”
Meanwhile, uncertainty surrounding UK Prime Minister Boris Johnson’s future continues to sour Sterling sentiment, as speculation persists that Conservative MPs may attempt to oust him through a vote of no confidence.
Canadian Dollar (CAD) Slips as Crude Prices Dip
The oil-sensitive Canadian Dollar (CAD) is coming under pressure again today due to oil prices falling for a third consecutive day this week.
WTI crude has retreated to $88 a barrel as investors anticipate talks between the US and Iran will allow the OPEC producing country to export more oil, increasing global supply.
After oil’s recent rally to a seven-year high last week on concerns over tight supply, geopolitical tensions between the EU and Russia, and disruption to supply in the UAE, the prospect of Iran supplying up to 1 million barrels per day and lifting global supply by 1% is pushing crude prices lower.
Meanwhile, Canadian trade data for December released yesterday continues to weigh on CAD exchange rates.
The trade balance for December unexpectedly showed a deficit of CA$137 million, instead of the CA$2.5 billion forecast, and raising concerns over the impact on Canadian GDP growth in the fourth quarter.
Imports rose to an all-time record high of 3.7%, and exports fell by 0.9% as crude prices fell back at the end of the year.
However, with oil prices surging again at the start of the year, analysts expect Canada’s trade balance to return to surplus.
Pound Canadian Dollar Forecast: GBP/CAD to Extend Gains?
The Pound Canadian Dollar exchange rate may extend its gains in the coming days, especially if the US eases sanctions on Iran and allows the country to export more crude oil.
The increase in global supply would lower crude prices and likely dent the oil-sensitive ‘Loonie’.
However, a speech from Bank of Canada (BoC) governor Tiff Macklem may provide the Canadian Dollar with some support, as investors will look for signals on the central bank’s forward guidance as markets increasingly anticipate a rate hike at the start of March.
Meanwhile, the Pound will likely remain sensitive to UK political developments in the coming days ahead of UK GDP growth data released on Friday.
Pressure appears to be mounting on Boris Johnson over the Downing Street parties scandals, with his attempts at a government cabinet reshuffle and restructure in Number 10 seemingly failing to improve his position.
Instability in the Northern Ireland Assembly may also drive GBP movement, as disruption caused by the DUP in protest at the Northern Ireland Protocol threatens to heighten tensions in UK-EU talks, potentially leading to trade disruption.