GBP/CAD Exchange Rate Increases as Optimism Over Britain’s Economic Recovery Grow
The Pound to Canadian Dollar (GBP/CAD) exchange rate edged higher today, with the pairing currently up by 0.4% and trading around CA$1.68.
Sterling has benefited from rising hopes that Prime Minister Boris Johnson could relax social distancing guidelines tomorrow.
As a result, GBP traders are becoming more optimistic that the UK economy could be on the road to recovery.
However, today saw the UK factory orders fall to their worst quarter on record in the three-months of nationwide coronavirus lockdown. Consequently, some Sterling investors are becoming worried about the industrial sector’s ability to recover from the Covid-19 crisis.
Anna Leach, CBI Deputy Chief Economist, was however optimistic about the UK’s economic recovery, saying:
‘The Government has already undertaken a huge amount of work to provide financial lifelines to businesses throughout this unprecedented period. With firms having been encouraged to restart operations, the Government must continue to engage with the sector to understand their specific concerns and provide support as needed.’
Canadian Dollar (CAD) Sinks Despite Bank of Canada Ruling Out Negative Interest Rates
The Canadian Dollar (CAD) failed to rise against the Pound today despite the Bank of Canada (BoC) quelling talks of sub-zero interest rates. Consequently, ‘Loonie’ investors are beginning to lighten up about Canada’s economic recovery in the coming months.
Andrew Kelvin, chief Canada strategist at TD Securities, commented:
‘The Bank of Canada has done a better job than some other central banks of quashing speculation around further rate cuts.’
‘If you think that the economy did hit bottom in April, a rate hike in two years … is a plausible outcome I think.’
However, the ‘Loonie’ has continued to benefit from other assets today, despite growing fears of a possible second wave of Covid-19 cases in Europe.
Furthermore, oil-prices have dipped on Monday, dampening hopes in one of Canada’s major exports. Any further slippage in oil prices would prove CAD-negative.
The Canadian Dollar (CAD) has benefited from China’s confirmation that it would continue to engage with the US-China phase one trade agreement. As a result, the risk sensitive ‘Loonie’ has benefited from signs that tensions between the world’s two largest economies could be easing.
GPB/CAD Outlook: Could Sterling Rise Higher as Social Distancing Guidelines are Relaxed?
Pound (GBP) investors will be looking ahead to tomorrow’s release of the UK’s Markit Services PMI for June. Any signs of improvement in the UK’s largest sector would prove GBP-positive.
Tomorrow will also see the release of the UK Manufacturing PMI for June. If this rises out of contraction territory, we could see the Pound benefit.
The Canadian Dollar (CAD) will continue to be driven by oil-prices this week. A sudden dip in oil prices could drag down the ‘Loonie’ as concerns over the nation’s largest export weigh on the Canadian currency.
The GBP/CAD exchange rate could edge higher tomorrow as Downing Street is expected to announce relaxations of the social distancing guidelines. As a result, Sterling could edge higher as hopes for the British economic recovery improve.
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