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

February 19, 2020 – Written by John Cameron

GBP/CAD Exchange Rate Sinks as ‘Loonie’ Rises on Lull in Coronavirus Fears

The Pound Canadian Dollar (GBP/CAD) exchange rate dipped by -0.3%, with the pairing currently trading around CA$ 1.716 after Canada’s inflation report for January beat forecasts and rose from 0% to 0.3%, while the year-on-year figure also increased by 2.4%.

Analysts at Reuters commented:

‘Gasoline prices surged 11.2% year-over-year… as oil prices climbed at the start of the month amid concerns over global supplies spurred by tensions between the United States and Iran.’

Rising oil prices also continue to boost the oil-sensitive ‘Loonie’ due to a fall in the number of coronavirus cases in China for the second day in a row.

However, with China’s economy likely to struggle in the first quarter due to the coronavirus epidemic, this has left some Canadian Dollar (CAD) investors remaining cautious as this could weaken the trade-dependent Canadian economy in the near-term.

GBP/CAD Exchange Rate Falls Despite Better-than-Expected UK Inflation

The Pound (GBP) struggled to gain in spite of today’s stronger-than-expected UK inflation report for January, which rose to a six-month high of 1.8%.

Ayus Ansal, Investment Chief at Crimson Black Capital, commented:

‘A rise was priced in but for inflation to surge by so much in just one month will have caught pound watchers by surprise. In just a month the doves at the Bank of England have gone from driving seat to back seat.’

‘With the chances of an interest rate cut now negligible, the pound will inevitably benefit.’

Post-Brexit uncertainty, however, continues to haunt UK markets today after Michel Barnier, the EU’s Chief Brexit Negotiator, dashed Downing Street’s hopes of a Canada-style trade agreement between the UK and EU.

This comes after the British Chief Brexit Negotiator, David Frost, commented that the UK would not be seeking to align with EU rules. As a result, Sterling traders are feeling increasingly jittery over the prospect of a no-deal following the transition period.

GBP/CAD Outlook: Could Sterling Rise on Strong Retail Sales?

Sterling investors will be looking ahead to tomorrow’s release of January’s UK retail sales report, which is expected to rise from -0.6% to 0.7%. Consequently, we could see the Pound edge higher against the Canadian Dollar as the British economic outlook improves.

The Canadian Dollar (CAD) will continue to be driven by oil prices and global trade developments in tandem with China’s coronavirus epidemic. Any signs of easing fears, or rising oil prices, would boost the risk-averse Canadian currency.

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TAGS: Canadian Dollar Forecasts Pound Canadian Dollar Forecasts