Pound Canadian Dollar (GBP/CAD) Exchange Rate Firms as CAD Faces USD Correlation Headwinds
The Pound Canadian Dollar (GBP/CAD) exchange rate is ticking higher this morning as the Canadian Dollar (CAD) struggles due to its increasingly close correlation with the US Dollar (USD).
At the time of writing the GBP/CAD exchange rate is trading around CA$1.6495, which is up around 0.1% from this morning’s opening rate.
Canadian Dollar (CAD) Struggles Due to ‘Greenback’ Weakness
The Canadian Dollar is muted today, as CAD exchange rates are weighed down by their close correlation to the US Dollar.
USD began to weaken on Wednesday caused by dovish comments from the Federal Reserve about slowing the rate of interest rate hikes. A rapid sell-off ensued, which in turn has impacted CAD.
However, it appears that the commodity-linked Canadian Dollar’s downside is being limited by oil prices this morning. At the time of writing, crude oil is trading at around $81 per barrel, and is on track to enjoy its first weekly rise since November.
This lift comes as the European Union has tentatively agreed to cap the price of Russian crude oil at $60 per barrel.
Commenting on the price cap, Stephen Innes, Managing Partner at SPI Asset Management, said:
‘Since the price cap is lower than what has previously been bandied around, it raises the spectre of some form of Russian supply retaliation which should lend support for oil prices.’
Pound (GBP) Capped by Cost-of-Living Concerns
The Pound (GBP) is firming today as an upbeat market mood continues to support the risk-sensitive UK currency.
However, Sterling’s upside seems limited by a lack of data today alongside fairly downbeat domestic headlines about the UK’s cost-of-living crisis.
New data from the British Retail Consortium (BRC) shows that high-street footfall is continuing to drop as cash-strapped shoppers opt to stay at home.
A combination of rising inflation and recession woes are beginning to strain consumers. As households become more price conscious, declining sales could spell trouble for British retailers and the wider UK economy.
BRC Chief Executive Helen Dickinson comments:
‘Despite retailers doing their best to keep prices as low as possible for their customers, financial concerns are trumping spending for many households.’
These worries seem to be limiting GBP/CAD’s gains today.
Pound Canadian Dollar Exchange Rate Forecast: UK Services PMI to Drive GBP?
Later today, some key US data could trigger GBP/CAD movement. If the American non-farm payrolls report sparks a downside in USD, GBP/CAD could climb.
Looking to next week, the Pound Canadian Dollar exchange rate could be driven by the UK’s services PMI.
The finalised figures are expected to hold steady at 48.8. Unchanging data could ease recession fears in GBP investors and lift Sterling. If, however, the data prints a decline it could damage the UK’s economic outlook further and dent the Pound.
On Tuesday Canada’s balance of trade report will likely drive CAD exchange rates. In October the trade surplus is expected to rise to C$3.4bn. This could lift the commodity- and export-linked ‘Loonie’ .