GBP/CAD Exchange Rate Muted amidst Oil Price Surge
The Pound Canadian Dollar (GBP/CAD) exchange rate is stuck trading at a one-week low this morning as Russia’s invasion of Ukraine has propelled oil prices above $100.
At the time of writing the GBP/CAD exchange rate is trading at around CA$1.7233, virtually unchanged from this morning’s opening levels.
Canadian Dollar (CAD) Drawing Limited Support from Oil Price Rally amid Slump in Equity Markets
Trade in the Canadian Dollar (CAD) is mixed so far this morning. The commodity-linked currency has only been able to draw limited support from a sharp appreciation of oil prices as Russia’s invasion of Ukraine rocks markets.
Brent crude climbed above $100 a barrel for the first time since 2014 this morning. The international benchmark for oil prices is now sitting above $103 after rallying 6%.
The sharp uptick in oil prices came in response to Russia’s invasion of Ukraine. Markets fear this could limit global supplies as Western powers are likely to respond by imposing restrictions on Russian oil exports.
Warren Patterson, head of ING’s commodity research, commented:
‘Russia’s announcement of a special military operation into Ukraine has pushed Brent [above] the $100 per barrel mark.
‘This growing uncertainty during a time when the oil market is already tight does leave it vulnerable, and so prices are likely to remain volatile and elevated.’
The Canadian Dollar would traditionally benefit from such a sharp uptick in oil prices. However, the situation in Ukraine has rattled markets and sees investors wary of any assets which might be perceived as risky.
Pound (GBP) Muted as Ukraine Crisis Dampens BoE Rate Hike Expectations
At the same time, the Pound (GBP) is muted this morning amidst speculation the situation in Ukraine could see the Bank of England (BoE) adopt a more cautious approach to monetary tightening.
Analysts at MUFG Bank predict:
‘The conflict is likely to encourage market participants to scale back expectations for monetary tightening from major central banks in the near-term.
‘We would expect the UK and US rate markets to continue to adjust expectations more in favour of smaller 0.25 point hikes being delivered at their next meetings in March rather than 0.50 point hikes to reflect the heightened uncertainty.’
This comes hot on the heels of comments from BoE Governor Andrew Bailey, who warned markets ‘not to get carried away’ with their rate hike bets.
GBP/CAD Forecast: Ukraine Developments to Infuse Volatility Going Forward
Looking ahead, it seems safe to assume the situation in Ukraine will dominate movement in the currency market in the near-term.
This could infuse the Pound Canadian Dollar (GBP/CAD) exchange rate with some volatility later today as Western powers announce additional sanctions on Russia. The harsher these sanctions are more volatile the market is likely to be.
Elsewhere, GBP investors will also be looking to BoE’s Bailey for additional comments today, with Sterling vulnerable to losses if he remains cautious in his outlook for future interest rate hikes.