Pound Canadian Dollar Exchange Rate Tumbles amid Skyrocketing Commodity Prices
The Pound Canadian Dollar (GBP/CAD) exchange rate is on the back foot this morning as soaring oil prices underpin demand for the ‘Loonie’.
At the time of writing the GBP/CAD exchange rate is trading at around CA$1.6888, down roughly 0.3% from this morning’s opening levels.
Canadian Dollar (CAD) Rises in Tandem with Oil Prices
The Canadian Dollar (CAD) is off to a strong start today as a sharp appreciation in oil prices reflects positively on the commodity-sensitive currency.
Brent crude struck a 10-year high of $119 per barrel this morning. Russia’s war in Ukraine has sparked considerable concerns over possible supply shortage.
The West is yet to place any sanctions on Russian oil exports. However, as the world’s second largest-oil producer there is a clear risk of global supplies being disrupted if restrictions are imposed in the future.
As a key Canadian export, the surging price of oil will no doubt bolster domestic growth in the first quarter of 2022.
Reinforcing this uptrend in CAD exchange rates was the Bank of Canada’s (BoC) decision to raise interest rates as it concluded its March policy meeting on Wednesday.
The BoC raised interest rates from 0.25% to 0.50% as expected, whilst also signaling more rate hikes are likely to follow this year as it seeks to tame inflationary pressures in Canada.
Pound (GBP) Muted as War in Ukraine Likely to Exacerbate UK’s Cost-of-Living Crisis
At the same time, the Pound (GBP) is struggling to attract support this morning as the war in Ukraine darkens the UK’s economic outlook.
With commodity prices rocketing to multi-year highs, there can be no doubt that global inflationary pressures will continue to build.
This is a major concern for GBP investors as it comes at a time when the UK is already facing a cost-of-living crisis.
UK inflation is already at a 30-year high and is now expected to soar well above 7% following Russia’s invasion of Ukraine.
Analysts fear the sharp rise in commodity prices will further squeeze household budgets, with falling consumer spending likely to suppress UK economic growth going forward.
Pound Canadian Dollar Forecast: Extended Oil Rally to Bolster CAD?
Looking ahead, it seems safe to assume that the crisis in Ukraine and oil price dynamics while continue to drive movement in the Pound Canadian Dollar (GBP/CAD) exchange rate through the remainder of the week.
This may see the ‘Loonie’ maintain its bullish momentum if we see oil prices continue to push higher. A move above $120 a barrel would likely trigger some notable demand for the commodity-linked currency.
On the other hand, in the absence of any notable UK data, the direction of the Pound looks to be driven by market sentiment. Expect Sterling to remain on the back foot so long as a gloomy mood continues to prevail.