Pound Canadian Dollar (GBP/CAD) Exchange Rate Rallies as CAD Crumples
(Updated 16:20, 08/06/23) The Pound Canadian Dollar (GBP/CAD) exchange rate continued its impressive recovery this afternoon, rallying 0.7% from a seven-week low to a six-day high.
The upside came as the Canadian Dollar (CAD) suffered from its positive trading relationships with both the US Dollar (USD) and oil.
USD faced broad-based selling pressure amid uncertainty over the Federal Reserve’s next rate decision. A jump in US jobless claims – which rose to their highest level since October 2021 – added to the US Dollar’s downside.
Furthermore, oil prices slumped this afternoon, erasing earlier losses. At the time of writing, WTI crude is down 0.9% on the day, having dropped to $71.90 per barrel.
Meanwhile, the Pound (GBP) is enjoying rising expectations for more Bank of England (BoE) interest rate rises.
Currently, GBP/CAD is trading at CA$1.6746, surging up from an earlier low of $1.6610.
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Pound Canadian Dollar (GBP/CAD) Exchange Rate Recoups Some Post-BoC Losses
(Updated 14:20, 08/06/23) The Pound Canadian Dollar (GBP/CAD) exchange rate managed to regain some ground this afternoon as the Canadian Dollar (CAD) suffered from its positive correlation with the US Dollar (USD).
The safe-haven ‘Greenback’ weakened today amid a risk-on market mood and uncertainty around the Federal Reserve’s next interest rate decision. USD faced further losses after the latest employment data from America missed forecasts. Initial jobless claims jumped more than forecast last week, with signs of slack in the US labour market further denting Fed bets.
As the Canadian Dollar shares a positive trading relationship with the US Dollar, the fall in USD pulled CAD lower.
However, CAD’s downside seems limited. The commodity-linked ‘Loonie’ remains underpinned by stronger oil prices and ongoing support following the Bank of Canada’s (BoC) interest rate rise yesterday.
Meanwhile, the Pound (GBP) has managed to pick up bids as markets price in more rate hikes from the Bank of England (BoE).
At the time of writing, GBP/CAD is trading at CA$1.6679, up over 0.3% on the day.
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Pound Canadian Dollar (GBP/CAD) Exchange Rate Trapped amid Thin Trading Conditions
The Pound Canadian Dollar (GBP/CAD) exchange rate is stuck at a seven-week low today, as yesterday’s hawkish surprise from the Bank of Canada (BoC) continues to pressure the pairing.
At the time of writing, the GBP/CAD exchange rate is trading at CA$1.6633, virtually unchanged on the day.
Canadian Dollar (CAD) Stays Strong following BoC Hike
The Canadian Dollar (CAD) maintains support today after yesterday’s BoC decision surprised markets.
After leaving interest rates on hold for four months, the Bank of Canada delivered an unexpected 25bps hike to bring the overnight rate to a 22-year high. CAD jumped following the decision, recouping losses suffered earlier in the session.
The move has boosted speculation that the BoC is restarting its tightening cycle. Markets are now pricing in another 25bps rate hike next month, while there is even the possibility of an additional quarter-point increase in September.
These rate hike bets are underpinning the Canadian Dollar today. The ‘Loonie’ is holding its gains, even as the Pound (GBP) strengthens against some of its other rivals.
However, weakening oil prices are putting some pressure on the commodity-linked currency, preventing it from rising higher against GBP.
Pound (GBP) Propped Up by BoE Bets
Meanwhile, the Pound is finding some success this morning against its weaker peers as Bank of England (BoE) interest rate rise bets lend Sterling support.
Yesterday, the Organisation for Economic Co-operation and Development (OECD) upgraded its economic forecast for the UK. Echoing the International Monetary Fund’s (IMF) recent revision, the group no longer expects a UK recession this year.
Additionally, the OECD warned that the UK would have some of the highest levels of inflation in the developed world this year.
Both the brighter economic forecasts and the signs of stubbornly high inflation boosted BoE rate hike bets, and these are shoring up the Pound today. This is cushioning GBP/CAD from further losses.
GBP/CAD Exchange Rate Forecast: Canadian Jobs Data in the Spotlight
For the remainder of today’s trade, GBP/CAD could struggle to escape its narrow range. Both UK and Canadian economic data are thin on the ground, so movement may be limited.
Oil price dynamics may drive the ‘Loonie’. If crude continues to decline, we may see the Canadian Dollar cede some ground.
Friday brings a raft of labour market data releases for the ‘Loonie’. Markets expect Canada’s unemployment rate to rise while wage growth slows. If the reports print as forecast, this could dent BoC rate hike bets and therefore trim CAD’s winnings.
However, if the data exceeds forecasts, showing that the Canadian labour market is running hot, CAD could climb to multi-month highs against GBP.