(Updated 16:45 31/03/22)
The Pound Canadian Dollar (GBP/CAD) exchange rate traded within a narrow range for the latter half today. The currency pair shed many of its earlier gains following the release of Canadian GDP data.
Figures indicated that the Canadian economy expanded by 0.2% in January despite further Covid restrictions. The ‘Loonie’ likely saw increased bets today amid expectations of an early rate hike from the Bank of Canada (BoC).
Pound Canadian Dollar (GBP/CAD) Exchange Rate Gains as Oil Prices Slump
The Pound Canadian Dollar (GBP/CAD) exchange rate is steadily climbing today. A sharp drop in oil prices is denting confidence in the Canadian Dollar (CAD). The Pound (GBP) meanwhile is seeing some optimistic trading after better than expected GDP figures.
At time of writing the GBP/CAD exchange rate is at around $1.6439, which is up roughly 0.2% from this morning’s opening figures.
Canadian Dollar (CAD) Slides as US Considers Huge Oil Release
The Canadian Dollar (CAD) is struggling to make gains against its rivals today amid plunging oil prices. Prices of the commodity have tumbled after reports that the US is considering a release of up to 180 million barrels.
The price of crude per barrels dropped by nearly -5% to around $102.53. US President Joe Biden is set to give remarks later today regarding his administration’s actions to try and lower prices. Analysts feel a potential release could help stabilise volatility in the oil markets following sanctions imposed on Russian oil.
Warren Patterson, head of commodities strategy at ING, said:
‘If it turns out to be as much as that, it would be significant and so would certainly help to a certain extent to fill the shortfall, but not all of it.’
Thursday’s meeting of the OPEC group could also prompt fluctuations in the price of crude. The group, which counts Russia among its members, is expected to leave its oil production levels unchanged. The move could upset Western nations, who have been calling for the group to do more in the face of the Ukraine-Russia conflict. On the other hand, the energy ministers of Saudi Arabia and the United Arab Emirates have encouraged the group not to engage in politics.
Pound (GBP) Climbs as UK Economy Steadily Recovers
The Pound (GBP) is making headway against its rivals today following above-forecast GDP figures for the fourth quarter of 2021. The UK economy was just 0.1% below its pre-pandemic levels at the end of 2021.
Gains for Sterling off the back of these figures may be limited however. Figures indicated that household consumption was 1.1% below its pre-pandemic levels as the UK faces a cost of living squeeze. Paul Dales, chief UK economist at Capital Economics, suggested that the drop in real incomes was starting to bite into household incomes.
A drop in output may also weigh on any optimism over the figures. Samuel Tombs, chief economist at Pantheon Macroeconomics, said:
‘Exports have consistently underperformed relative to other advanced economies since the first quarter of 2021, suggesting that Brexit is largely to blame.’
GBP’s upward movement may also be limited amid renewed pessimism for a diplomatic solution to the war in Ukraine. Ukraine’s President Volodymyr Zelenskiy has warned that Russia is massing its forces for a fresh offensive in the country’s Donbas region.
GBP/CAD Exchange Rate Forecast: Will Canadian Economy Show Signs of Recovery?
Looking ahead for the Pound (GBP), the final reading of March’s S&P manufacturing PMI could boost Sterling on Friday should the figures print a rise as forecast.
For the Canadian Dollar (CAD), a forecast uptick to Canadian GDP in January may help bolster the currency later today. On the other hand, a predicted fall to March manufacturing output on Friday could limit any gains for the ‘Loonie’. Further fluctuations in the price of crude oil are also likely to drive further movement in CAD.