Pound Canadian Dollar Exchange Rate Strengthens amid Oil Price Slump
The Pound Canadian Dollar (GBP/CAD) exchange rate is gaining ground today as plummeting oil prices undermine CAD.
At the time of writing the GBP/CAD exchange rate is trading around CA$1.6690, which is up roughly 0.4% from this morning’s opening rate.
Canadian Dollar (CAD) Under Pressure as Oil Prices Fall
The oil-linked Canadian Dollar (CAD) is down against the majority of its peers today, weighed down by retreating oil prices.
At the time of writing WTI crude is trading around $71 per barrel, its lowest levels in almost a year.
Markets are becoming increasingly unnerved by the prospect of a global recession, which is weighing on oil prices amid fears demand for the commodity will fall. The US oil benchmark is down nearly 10% this week as US banks braces for an economic downturn next year.
JPMorgan Chase & Co (JPM.N) Chief Executive Jamie Dimon said that inflation continues to threaten consumer demand. Then added:
‘[Inflation] might very well derail the economy and cause this mild to hard recession that people are worried about.’
However, CAD found its downside limited as China’s continued easing its Covid restrictions. China’s reopening could help to undermine crude demand at the start of 2023.
Pound (GBP) Potential Capped by Lack of Data
The Pound (GBP) is up against CAD but muted against most of its other peers today. A lack of UK data is limiting movement.
Meanwhile headlines concerning the UK Treasury’s proposals about financial reforms have fallen flat. Dubbed the ‘Edinburgh reforms’ the plans will replace rules introduced to avoid repeating the 2008 Financial crash.
However, there are mixed responses, with many economists believing the reforms are not aggressive enough.
Commenting on the reforms Jonathan Herbst, Global Head of Financial Services Regulation at law firm Norton Rose Fulbright, said:
‘UK regulatory regime reflects either international commitments or policy developed over many years to reflect the lessons of experience. So, the talk of a Big Bang 2 may well be overdone.’
These lacklustre proposals are also failing to impress investors, which is limiting the Pound’s gains this morning.
Pound Canadian Dollar Exchange Rate Forecast: UK GDP Report to Drive GBP?
Looking ahead to the start of next week the GBP/CAD exchange rate could be driven by the UK’s GDP report.
Following a by 0.6% contraction in September, economists forecast GDP will rise by 0.4% in October, potentially lending some support to the Pound.
In the meantime, Sterling will likely continue to trade on domestic headlines. Reports of more business headwinds and consumer woes will likely limit the Pound’s upside potential.
On Monday a speech from the Bank of Canada’s Governor Tiff Macklem could move the ‘Loonie’. If he strikes a dovish tone, then CAD could face headwinds. Otherwise, the oil-linked Canadian dollar will likely remain tied to oil price dynamics.