Pound Sterling to Canadian Dollar (GBP/CAD) Conversion Rate Forecast to Plunge as Crude Oil Prices Rise
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate dived by around -2.3% on Monday afternoon.
After a long weekend of talks with EU officials, Prime Minister David Cameron managed to secure a deal to make major reforms to the UK’s relationship with the EU. Although Cameron was not successful in getting everything he had asked for, the Pound rallied in the aftermath of the news, especially after Cameron announced a referendum would take place on June 23rd.
However, Sterling’s appreciation was short-lived after it emerged that Mayor of London Boris Johnson will be supporting the campaign to leave the EU. As a political heavyweight, and someone who is expected to succeed Cameron as the head of the Conservative party, Johnson’s decision to back an exit was seen to significantly boost the likelihood that the UK will opt to sever ties.
Today has seen the Pound drop the most since the 2009 banking crisis, falling close to a seven-year low against the US Dollar.
‘The Pound is tumbling after the deal clinched by Prime Minister Cameron at the EU summit failed to alleviate fears about Brexit,’ said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole. ‘The fact that prominent members of the Conservative Party announced they will campaign for Britain to leave the EU likely underscored investors’ concerns that Brexit risks could increase from here despite the deal.’
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.9362.
Despite a complete absence of domestic data to provoke volatility, the Canadian Dollar rallied versus many of its currency rivals during Monday’s European session.
The appreciation can be linked to a combination of rising crude oil prices and improved market sentiment. Oil prices advanced thanks to speculation that US shale production will fall over the next few years.
‘Positive sentiment on the stock market and the impact of the lower US rig count gives some support to oil prices,’ said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.
Rising crude prices also caused global equities markets to advance which, in turn, saw trader risk appetite improve. As a high-yielding, risk-correlated asset the Canadian Dollar capitalised on heightened demand for riskier currencies.
Speculation that the People’s Bank of China (PBoC) will continue to use stimulus measures in order to reduce the impact of China’s economic slowdown is also supportive of improved market sentiment.
Pound Sterling to US Dollar (GBP/USD) Conversion Rate Predicted to Hold Losses Irrespective of Slowing US Manufacturing Output
The Pound Sterling to US Dollar (GBP/USD) exchange rate declined by around -1.8% on Monday afternoon.
Despite the fact that safe-haven demand was reduced in the face of rising global equities and crude oil prices, the US Dollar managed to hold gains versus a number of peers.
Given the extent of the currency GBP/USD losses, with the exchange rate close to a seven-year low, the Pound Sterling to US Dollar exchange rate is likely to hold losses irrespective of less-than-ideal US ecostats.
US economic data may impact on other USD based exchange rates, however. The Markit US Manufacturing PMI failed to meet with expectations of a slight rise from 52.4 to 52.5, with the actual result falling to just 51.
As we progress into the North American session and the Australasian session there is a good chance that the US Dollar will struggle versus many of its major competitors. This is due to heightened speculation that the Federal Open Market Committee (FOMC) have adopted a ‘wait-and-see’ stance and will not be willing to hike the overnight cash rate until more is understood about global economic futures.
With that said, a speech from San Francisco Fed Governor John Williams deviated from that of his colleagues who have all but dismissed the chances of an overnight cash rate hike in the near-future. ‘The basic approach we took, which is a gradual rate increase, is still right,’ Williams said.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.4144.
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast: UK Political Uncertainty to Extend GBP/USD Losses
With a complete absence of domestic data on Tuesday to cause Sterling volatility, there is a high chance that the Pound Sterling will continue to decline versus the US Dollar and the Canadian Dollar.
With that said, there could be a temporary recovery if traders wish to take advantage of the Pound’s low trade weighting, although with speculation that Sterling has far from bottomed out this is an unlikely occurrence.
Political uncertainty is certain to continue right up to the referendum vote in the UK, with the Pound predicted to endure massive price swings in reaction to the publication of opinion polls.
US data has the potential to cause ‘Greenback’ (USD) movement tomorrow. Perhaps the most significant of which will be January’s Existing Home Sales and February’s Consumer Confidence reports. Market sentiment could also play a key role in US Dollar movement.
A complete absence of Canadian economic data tomorrow should see the ‘Loonie’ (CAD) endure movement in response to market sentiment and crude oil prices.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 1.9263 to 1.9710.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.4056 to 1.4298 during Monday’s European session.
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