Pound Canadian Dollar (GBP/CAD) Exchange Rate Continues Downturn as Oil Prices Climb
(Updated 16:38 08/12/22)
The Pound Canadian Dollar (GBP/CAD) exchange rate fell further over the course of today’s session. The healthy recovery in crude oil prices likely weighed on the currency pair. The commodity continued to benefit from hopes of a rebound in Chinese demand as the country further eased its Covid-19 restrictions.
A lack of any clear catalyst for movement in the Pound (GBP) may have also kept pressure on the pair today. The exchange rate may have seen any drastic falls limited by further bets on a healthy interest rate hike from the Bank of England (BoE), however. A poll released by Reuters today found that all but two of the economists surveyed backed a 50bps rate hike from the central bank at their next meeting.
Elizabeth Martins at HSBC said:
‘Almost a year to the day after the BoE began this tightening cycle, it looks set to deliver another Christmas hike. We think it will be a 50 bp rise, taking Bank Rate to 3.50%, with risks weighted towards a larger 75 bp move, rather than a smaller 25 bp one.’
At time of writing the GBP/CAD exchange rate was at around C$1.6616, which is down roughly 0.3% from this morning’s opening figures.
Original article continues below:
Pound Canadian Dollar (GBP/CAD) Exchange Rate Slides as Oil Prices Climb
The Pound Canadian Dollar (GBP/CAD) exchange rate is slipping today. A lack of significant data and a poor outlook for the UK economy may be weighing on the currency pair. Climbing oil prices could also be pushing the exchange rate lower.
GBP/CAD’s falls could be limited by a dovish stance from the Bank of Canada (BoC), however.
At time of writing the GBP/CAD exchange rate was at around C$1.6640, which is down roughly 0.2% from this morning’s opening figures.
Canadian Dollar (CAD) Drops amid Dovish BoC Stance, Boosted Against GBP by Oil Uptick
The Canadian Dollar (CAD) is slipping against several of its peers today. The currency is making gains against a directionless Pound, however.
The currency could be seeing losses from the Bank of Canada’s (BoC) dovish signals following its interest rate decision on Wednesday. The central bank hiked rates by 50bps, bringing its interest rate to its highest level in 15 years amid a tight labour market and strong growth.
The BoC dropped its previous forward guidance however as it signalled that rate hikes would soon come to an end.
In a statement following the decision, the central bank said:
‘Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance and return inflation to target.’
An uptick in oil prices may be preventing drastic losses for the commodity-tied ‘Loonie’ however and bolstering CAD against the Pound. After a sharp decline on Wednesday, hopes for renewed Chinese demand for the commodity helped to bolster oil prices.
Pound (GBP) Ticks Lower as Poor UK Outlook Weighs on Currency
The Pound (GBP) is edging lower today. Sterling is continuing to shift in a narrow range amid a lack of significant data. The UK’s poor economic outlook may be weighing on the currency today.
On the other hand, expectations of a 50bps interest rate hike from the Bank of England (BoE) could be limiting losses for GBP today. Experts are largely anticipating a 50bps interest rate from the BoE at their next meeting.
Investec economist Philip Shaw said:
‘To our minds, another 50 basis point increase looks likely. The BoE has made it pretty clear that inflation is too high. It’s concerned about the tightness of the labour market. And there are big risks to its projections.’
Signs of a cooler labour market today may be adding to bets on cooler action from the BoE. Data released by the Recruitment and Employment Confederation (REC) indicated a drop in staff demand and pay growth in November.
The possibility of a 75bps rate hike could be prompting some jitters around the Pound, however. There are concerns that overly aggressive policy tightening could push the UK economy into a deeper recession in the coming months.
GBP/CAD Exchange Rate Forecast: Will Oil Prices Recover from Drastic Losses?
Looking to the rest of the week for the Canadian Dollar, a speech from BoC deputy governor Sharon Kozicki could dent confidence in CAD if she adds to the central bank’s dovish signals.
The ‘Loonie’ may also see movement amid any further shifts in crude oil prices.
With no significant data left for the rest of the week, the Pound could be affected by shifts in risk appetite and BoE rate hike bets.
The lack of data could also leave GBP at the whims of other market forces, meaning that any shocks in the global economy could affect the currency.