Pound Canadian Dollar (GBP/CAD) Exchange Rate Leaps as UK Bond Prices Strengthen
(Updated 16:40 10/11/22)
The Pound Canadian Dollar (GBP/CAD) exchange rate made strong gains over the course of today. UK government bond prices rose after cooler-than-expected US inflation data, bolstering the currency pair.
The pair was also bolstered by weakness in the US Dollar (USD) following the data releases. Bets on GBP/CAD were limited ahead of Friday’s key UK GDP data, however.
A recovery in crude oil prices may have also capped gains for the currency pair today.A tight supply outlook boosted prices of the commodity.
At time of writing the GBP/CAD exchange rate was at around CA$1.5604, which is up roughly 1.5% from this morning’s opening figures.
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Pound Canadian Dollar (GBP/CAD) Exchange Rate Trends Sideways amid Risk-Off Mood
The Pound Canadian Dollar (GBP/CAD) exchange rate is trading within a narrow range today. Renewed confidence in UK PM Rishi Sunak may be underpinning the currency pair. Tumbling crude oil prices could also be lending support to GBP/CAD.
On the other hand, persistent fears for the health of the UK economy could be limiting gains for the pair.
At time of writing the GBP/CAD exchange rate is at around CA$1.5391, virtually unchanged from this morning’s opening figures.
Pound (GBP) Bolstered by Hopes for PM Sunak
The Pound (GBP) is gaining today despite a poor outlook for the UK economy. The currency is seeing rebound amid renewed hopes for Rishi Sunak’s premiership.
Reports today indicated that PM Sunak is to become the first UK Prime Minister since 2007 to meet the Irish PM. Sunak is expected to commit to restoring the power-sharing arrangement in Stormont.
Northern Ireland Secretary Chris-Heaton Harris has confirmed that an election in Northern Ireland will be held in early 2023.
Gains for Sterling may be capped by the continued poor outlook for the UK’s economy, however. GDP figures for the UK later this week are expected to confirm the Bank of England’s predictions of a recession for the UK.
Calls for further aggressive interest rate hikes from the BoE may also be weighing on the Pound today. Several former BoE policymakers have argued for such moves to curb soaring inflation.
John Vickers, a former deputy governor of the BoE, said in a speech on Wednesday:
‘As things stand currently, they need to tighten policy appreciably when the real economy is weakening. This may well need more boldness than has been evident so far.’
Finally, further downbeat assessments of the health of the UK’s retail sector could also keep pressure on Sterling. Next CEO Simon Wolfson stated today that the UK’s labour market would continue to struggle unless the government relaxed its current immigration policy.
Canadian Dollar (CAD) Climbs Despite Oil Price Slump
The Canadian Dollar (CAD) is firming today despite a retreat in global risk appetite today. The currency may be benefitting from its correlation to a strengthening US Dollar (USD).
On the other hand, the commodity-tied ‘Loonie’ is likely to see upward movement limited by retreating crude oil prices. The introduction of fresh Covid-19 restrictions in China has hurt demand prospects for the commodity.
Tamas Varga of oil broker PVM said:
‘Chinese COVID-related demand woes, the reinvigorated dollar and a loose fourth-quarter oil balance could push prices further south.’
Warning signs from the Canadian housing sector could also weigh on CAD today. Reports today indicated that the Romspen Mortgage Investment Fund has halted redemptions amid a lack of repayments.
GBP/CAD Exchange Rate Forecast: Will GDP Data Indicate Deeper Recession?
Later today, a speech from BoE policymaker Silvana Tenreyro could push Sterling lower if she hints at a slower pace of policy tightening.
Looking to the rest of the week for the Pound, investors will likely be most focused on Friday’s GDP figures. The data is forecast to indicate a contraction in the UK’s economy in October, and the third quarter as a whole. If markets take this as signs of a deepening recession then it could see Sterling tumble.
Also on Friday, a narrowing in the UK’s trade deficit could help prevent significant losses for GBP if figures print as forecast.
With no significant data for the rest of the week, movement in the Canadian Dollar is likely to be driven by fluctuations in the price of oil and changes in risk appetite.