Pound Canadian Dollar Exchange Rate Climbs Overall through Today’s Session
(Updated 17:00, 25/04/2022) The Pound Canadian Dollar (GBP/CAD) exchange rate traded in a narrow range today, closing the session marginally higher than this morning’s opening levels as plummeting crude oil prices sink the ‘Loonie’.
WTI dropped more than $6.0, being valued in the mid-$90s at the European close of session amidst fears of an economic slowdown in China. China’s failure to contain the Covid-19 virus in Shanghai despite intensive lockdown measures has had far-reaching effects, denting global risk sentiment due to fears of international repercussions.
One analyst remarked that ‘China is the elephant in the room… The tightening Covid-zero restrictions in Shanghai, and fears Omicron has spread in Beijing, torpedoed sentiment today.’
Concerning the Canadian Dollar specifically, another warned that Shanghai is vowing to step up the enforcement of COVID restrictions, which could hurt oil demand further. Oil bears will be eyeing lows of $93.0 according to some, as China has already seen its daily crude consumption drop by around 1.2million barrels-per-day this month.
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GBP/CAD Exchange Rate Slumps on Projected UK Slowdown
The Pound Canadian Dollar (GBP/CAD) exchange rate is falling so far today as the Pound (GBP) faces continuing pressure on projections of an economic slowdown. Meanwhile, the Canadian Dollar (CAD) enjoys renewed strength ahead of this afternoon’s speech from Bank of Canada (BoC) Governor Tiff Macklem.
At the time of writing, GBP/CAD is trading at C$1.6244, down 0.4% from today’s opening levels.
Pound (GBP) Slumps on Disappointing CBI Data
The Pound is tumbling against its peers following the release of fresh data from the Confederation of British Industry (CBI). Today’s releases appear to justify the concerns of the International Monetary Fund (IMF), who last week forecast that the UK would be the worst performing G7 currency in 2023.
The data shows that industrial trends orders fell to 14 in April 2022 from 26 in March – the lowest reading in six months.
Anna Leach, CBI deputy chief economist, commented that ‘manufacturing orders and output continue to grow, albeit at slower rates… but the war in Ukraine is exacerbating the Covid-related supply crunch, with cost increases and concerns over the availability of raw materials at their highest since the mid-1970s.’
Furthermore, business optimism has fallen to -34 for the second quarter from -9 in the previous period. This reflects the weakest morale since 2020, as selling prices grew at their fastest paces in over 40 years while investment intentions weakened notably.
With today’s data adding to GBP headwinds over the UK’s cost-of-living crisis and an uncertain outlook from the Bank of England (BoE), Sterling sentiment looks is unlikely to recover in the near-term.
According to analysts at MUFG, GBP remains vulnerable while other currencies anticipate a rebound.
‘Building evidence of a more abrupt slowdown will make the BoE cautious,’ said economists; ‘in contrast, the Fed is now more determined to front-load rate hikes.’
Canadian Dollar (CAD) Strengthens despite WTI Downturn
The Canadian Dollar has found some unlikely support today as oil prices tumble. WTI crude is depreciating in value as Covid cases in China spread from Shanghai to Beijing, threatening industrial production and therefore oil demand.
Possibly capping losses is news that China’s cabinet have unveiled more measures to promote consumption potential. As lockdown measures threaten industry, support for the Chinese economy promotes new investment and construction, suggesting an increase in energy demands ahead.
Furthermore, a speech later today from BoC Governor Tiff Macklem keeps CAD investors optimistic, given his previous hawkish comments; earlier in the month, Macklem stressed the need for higher interest rates, adding that the central bank are prepared to move more aggressively if the situation warrants it.
The Bank of Canada (BoC) hiked interest rates by 50bps on 13 April, with policymakers insisting that interest rates would need to rise further as the economy moves into excess demand; since then, inflation was revealed to have risen to 6.7% in March 2022, applying further pressure on the BoC to hike rates.
GBP/CAD Exchange Rate Forecast: Macklem Speech to Send Rate Lower?
Looking ahead, this afternoon’s speech from Governor Tiff Macklem could be the main driver of the Pound Canadian Dollar exchange rate, given a lack of economic data on either side.
Elsewhere, if support for Ukraine continues to grow in the face of ‘Russia’s failure’, risk-on tailwinds could support both GBP and CAD.