The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate experienced a brief jump of around 20 pips yesterday after oil prices dropped, however both currencies are currently experiencing little movement thanks to a lack of data.
Bank of England (BoE) Stress Reports Weigh on a Weak Pound
While GBP/CAD dipped to its lowest point in almost a year earlier last week due to continued fears of the effects a ‘Brexit’ could have on the UK economy, Canadian Dollar growth has slowed substantially since then due to its own economic concerns.
The GBP/CAD pair currently trades at around 1.8765, fluctuating on this morning’s opening levels of 1.8782.
Since last week the Pound has experienced something of a bounce-back against the ‘Loonie’, rising over 200 pips between the 23rd and the 25th. Some investors thought this may have marked the beginning of a Sterling rally, though Pound weakness seems likely to prevent its growth from being too bullish.
The Bank of England’s Financial Policy Committee (FPC) released a statement yesterday on the stresses the UK economy may face this year, particularly in the event of a ‘Brexit’ in June.
The central bank warns of the huge financial risks this would impose, citing possible Sterling crises and another credit crunch. This served as a reminder to investors not move too bullishly on the highly volatile Pound.
Oil Prices Fall by -3% as April OPEC Meeting Draws Closer
Crude oil prices dropped by around -3% yesterday, with WTI Crude falling to almost $38 per barrel. The ongoing oil price crisis has recently seen prices of Canada’s primary commodity export struggling to hold the $40 a barrel mark.
As a commodity currency, the Canadian Dollar is particularly sensitive to fluctuations in the global market. The ongoing crisis has regularly struck weakness into the ‘Loonie’ as oil prices began to plummet in the last year.
Federal Reserve Chairwoman Janet Yellen adopted a dovish tone in her speech on US interest rate possibilities yesterday, inspiring considerable risk-sentiment in investors and even driving up oil prices temporarily.
However, unlike its commodity bloc peers this was unable to inject much strength into the ailing CAD, suffering from a lack of domestic data and increasing worries that the oil price crisis will continue for longer than hoped.
The Organization of the Petroleum Exporting Countries (OPEC) is set to gather its member nations for a meeting on the 17th of April and discuss potential strategies for returning oil prices to normalcy.
Currently, a ‘freeze’ of production in order to drive demand and prices higher is proposed, but some members such as Iran are considering not taking part in such an agreement, dampening analyst hopes of a successful solution.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Domestic GDP Prints due this Week
While uncertainty surrounds UK and Canada’s domestic affairs and volatility in those areas is likely to continue, the GBP/CAD pair may see movement later this week after the data drought ends.
Tomorrow both nations will release key data, with Britain publishing Gross Domestic Product (GDP), consumer confidence and mortgage approval prints while Canada releases its highly important January GDP.
While positive British data may not strongly influence an extremely volatile Pound, or may print below forecasts due to decreased economic strength in recent months, strong Canadian GDP could bolster the ‘Loonie’ considerably.
Some investors and analysts will be comparing the data to North American GDP for December to get an idea of how Canadian growth is progressing. Matching or surpassing this could be enough to inspire confidence in the CAD even with the oil crisis weighing it down.
Risk-on sentiment in the global economy may also help keep the Canadian Dollar from sustaining too many losses, though this may not benefit the ‘Loonie’ as much as its peers due to oil price fears taking centre stage until after OPEC’s meeting.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate currently trends around 1.8765 while the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate trends in the region of 0.5323.
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