Pound Canadian Dollar (GBP/CAD) Exchange Rate Sinks as Rising Oil Prices Boost ‘Loonie’

February 14, 2020 – Written by John Cameron

GBP/CAD Exchange Rate Eases as Market Risk Appetite Returns for Canadian Dollar

The Pound Canadian Dollar (GBP/CAD) exchange rate fell by -0.4% today, with the pairing currently trading around CA$ 1.723 in spite of the International Energy Agency’s (IEA) warning that the coronavirus could see oil demand fall.

The oil-sensitive Canadian Dollar (CAD) rose instead as it was announced that China’s coronavirus outbreak would be short-lived, with increasing hopes that China’s central bank would pursue stimulus measures to counter the second largest economy’s slowdown.

BNP Paribas analyst Harry Tchilinguirian was also upbeat in his analysis, commenting:

‘It would seem in our view that the oil price is on a more positive footing in the past couple of days, with improved sentiment reflected in Asian equity prices holding up.’

With Canada’s economy particularly reliant on crude oil, and a healthy global supply chain with China, today’s news of China’s economic recovery have boosted the risk-sensitive ‘Loonie’.

GBP/CAD Exchange Rate Eases as March Budget Uncertainty Rises

The Pound (GBP) fell against the Canadian Dollar (CAD) after Downing Street refused to confirm whether March’s budget would go ahead as scheduled for the 11th March. As a result, this left Sterling traders feeling jittery as uncertainty over public spending threatens to weaken market confidence in the British economy.

Sterling struggled to make any gains from Mark Carney, the Governor of the Bank of England (BoE), expressing optimism over Brexit.

Mr Carney commented:

‘In an environment where everything is getting a fresh look, it’s fertile ground for taking a step back and making bigger changes than otherwise might have been made. It’s early days but there are several initiatives – the Budget will be telling – that suggest that some of these opportunities are being grasped.’

However, after the EU announced that it would likely take a harder position on UK-EU Brexit negotiations, Pound traders have become increasingly jittery on the prospect of a no-deal with the bloc.

GBP/CAD Outlook: Could Sterling Rise on Record-Low UK Unemployment?

Pound (GBP) investors will be looking ahead to Tuesday’s release of the UK ILO unemployment rate, which is forecast at remain at 3.8%. However, with the UK’s unemployment levels remaining at record-lows, we could see the GBP/CAD exchange rate rise on renewed optimism for the British economy.

Canadian Dollar (GBP) traders, meanwhile, will be looking ahead to Wednesday’s release of the Bank of Canada’s inflation report, which is expected to rise from 1.7% to 1.8%.

The GBP/CAD exchange rate will likely be driven by China’s coronavirus epidemic developments, with any signs of it slowing down boosting the ‘Loonie’ as oil prices rise.

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TAGS: Canadian Dollar Forecasts Pound Canadian Dollar Forecasts