Lack of Bank of England Action Supports Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate found some support in the wake of the Bank of England’s (BoE) scheduled March policy meeting.
While the BoE issued a fresh warning over the outlook of the UK economy this failed to weigh on the Pound during trade on Thursday.
As markets had not expected to see any fresh policy action at this stage GBP exchange rates were free to recover further ground in the wake of the meeting.
Support for the Canadian Dollar also picked up, however, as a sharp increase in US jobless claims saw the US Dollar fall out of favour.
With the safe-haven US Dollar under pressure investors found reason to buy back into the higher-yielding Canadian Dollar for the time being.
Even though the global oil oversupply glut looks set to persist for some time to come this was not enough to knock CAD exchange rates.
Canadian Dollar Remains Vulnerable to Oil Market Decline
However, as long as oil markets maintain their bearishness this is likely to limit the potential for Canadian Dollar gains.
With Brent crude trending below US$ 30 per barrel once again the risk of global supply continuing to outstrip demand could see the price decline further.
This looks set to cast a shadow over the commodity-correlated Canadian Dollar in the days ahead, especially if general market sentiment shows fresh signs of faltering.
Developments relating to the Covid-19 crisis could spark further volatility for CAD exchange rates, with markets still wary of the prospect of a severe global slowdown.
The release of January’s Canadian budget balance may also put a dampener on the Canadian Dollar, with forecasts pointing towards the budget slipping into a state of deficit.
Evidence that Canada’s fiscal health deteriorated even before the impact of the pandemic started to unfold could offer the GBP/CAD exchange rate a fresh boost.
Softer UK House Prices Set to Weigh on GBP Exchange Rates
March’s Nationwide house price index could see the Pound trending lower against its rivals, however.
While the figures are unlikely to reflect the full impact of the Covid-19 crisis and subsequent economic shutdown any signs of weakness here could weigh on GBP exchange rates.
With the UK housing market looking set to experience a turbulent period as households opt to sit still this is likely to stoke anxiety over the economic outlook.
As the shutdown of the UK economy continues fears of a major slowdown could keep the Pound from gaining any significant ground.
Until investors see signs of underlying economic resilience the GBP/CAD exchange rate may struggle to find any further upside momentum.
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TAGS: Pound Canadian Dollar Forecasts