(Updated 16:50 11/02/22)
The Pound Canadian Dollar (GBP/CAD) exchange rate has remained rangebound today. The commodity-tied ‘Loonie’ has continued to be underpinned by a rise in the price of crude oil, which as exerted pressure on the currency pair.
At time of writing the GBP/CAD exchange rate is at roughly $1.7245, nearly unchanged from this morning’s figures.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Subdued as UK GDP Beats Forecasts
The Pound Canadian Dollar (GBP/CAD) exchange rate has remained largely rangebound today. The currency pair dipped overnight as rising oil prices strengthened the Canadian Dollar (CAD), but climbed following better than expected UK GDP figures.
At time of writing the GBP/CAD exchange rate is at around $1.7254, virtually unchanged from this morning’s opening figures.
Pound (GBP) Makes Gains as UK Economy Grows at Fastest Pace since WW2
The Pound has edged higher versus some of its rivals today. The Pound’s (GBP) upward movement may have been limited by figures indicating a contraction to the UK’s economy in December. Strong GDP figures for 2021 may have kept Sterling propped up however.
Despite the impact of the Omicron wave, figures released on Friday showed that the UK’s economy contracted less than forecast in December. GDP fell by -0.2% versus an expected dip of -0.6%, although analysts warned that soaring inflation was likely to slow the country’s recovery in 2022.
Suren Thiru, head of economics at the British Chamber of Commerce, was quick to point out the challenges facing the UK economy:
‘The UK economy is facing a materially weaker 2022 as the crippling burden of rising inflation, soaring energy bills and higher taxes on consumers and businesses dampens activity, despite a temporary boost from the lifting of Plan B restrictions.’
Losses for the Pound may be limited by UK growth figures for 2021 however. The country’s economy grew by 7.5% during 2021, its fastest growth since the second world war. A strong rebound in the spring following the easing of lockdown restrictions was a key driver. The fast growth comes following a -9.4% fall in 2020 however owing to the Covid-19 pandemic.
The Pound could continue to see further headwinds regarding Prime Minister Boris Johnson’s conduct after former UK PM John Major accused Johnson of viewing the truth as ‘optional’, and that he had tarnished the UK’s overseas reputation.
Canadian Dollar (CAD) Buoyed by Recovery in Oil Prices
The Canadian Dollar (CAD) has made gains against many of its competitors as the price of crude oil has continued to edge higher. Positive UK growth figures may also helped aided CAD due to a positive correlation between the two economies.
The price of oil has remained largely subdued over the course of the week as investors await the end of talks between the US and Iran regarding the commodity. Should the US lift sanctions, the oil market could see a healthy supply injected into it from Iranian oil reserves. Prospects of an aggressive March rate hike by the US Federal Reserve have also suppressed the price of crude.
Ongoing protests in Ottawa could continue to generate headwinds for CAD however. Protestors demanding an end to the state’s Covid-19 restrictions have blockaded the Ambassador bridge that connects Canada to the US. Factories in the city are already reporting manufacturing and shipping delays due to the blockade.
GBP/CAD Exchange Rate Forecast: Will High Inflation Pressure Central Banks to Take Action?
Looking ahead to the coming week, January’s inflation figures are forecast to remain largely unchanged for the UK. This could push Sterling upward should investors see it as cause for the Bank of England (BoE) to pursue a more aggressive tightening of their monetary policy.
For the Canadian Dollar, a forecast rise in Canadian inflation in January could lift the Canadian Dollar higher on Wednesday. Renewed calls for the Bank of Canada (BoC) to act regarding soaring inflation could also increase speculative bets on CAD. Any further gains in oil prices could also push the ‘Loonie’ higher.