GBP/CAD Exchange Rate Edges Higher as ‘Loonie’ is Weighed Down by Darkening Oil Outlook
The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.4% today despite bouncing oil prices buoying the commodity-linked ‘Loonie’. The pairing is currently trading around CA$1.737.
However, the Canadian Dollar’s (CAD) gains against the Pound (GBP) have been short-lived due to growing fears that oil prices could slump 7 times more than during the financial crisis in 2008.
Analysts at MUFG said that oil is entering the ‘inflection stage in the cycle’, adding:
‘We expect the market to sternly test global storage capacity in the coming 2-3 weeks which will likely lead to significant volatility with more spikes to the downside to front-month oil prices.’
‘This will continue until we reach the equilibrium of supply equating demand, given storage and filling capacity constraints – as with nowhere to store the oil, supply has no other option but to be shut-in in-line with the expected demand losses.’
With oil making up a majority of Canada’s GDP, news of further impending volatility in the oil markets has weighed down on the oil-sensitive Canadian Dollar today.
Meanwhile, CAD investors will be awaiting today’s release of the Canadian GDP figure for February. If this falls below forecasts, then we could see the ‘Loonie’ continue to sink.
Pound (GBP) Rises as Boris Johnson Chairs Cabinet First Time Since Illness
The Pound (GBP) rose today as Prime Minister Boris Johnson is set to chair the cabinet ahead of the first daily briefing since his coronavirus illness.
Consequently, the Pound (GBP) edged higher on hopes that the UK could begin to outline its lockdown easing plans.
Meanwhile, hopes of a breakthrough at the University College of London with the drug Remdesivir – a potential drug to help prevent Covid-19 infection – were sparked after trials were ‘really promising’, despite ‘a little way to go’.
As a result, Sterling reacted positively to comments that ‘in principle’ this could help assist the easing of the UK lockdown in the near-term.
Today also saw the UK’s biggest car plant, owned by the car manufacturer Nissan, announce its plans to reopen in June.
A spokesman at Nissan said:
‘Our goal is to navigate through this crisis while maintaining activities critical for business continuity and to make sure we are prepared for the time when business resumes in Europe and we can welcome the Nissan team back to work.’
GBP/CAD Forecast: Could the ‘Loonie’ Fall on a Gloomy Canadian Manufacturing PMI?
Canadian Dollar (CAD) investors will be looking ahead to tomorrow’s release of April’s Canadian Markit Manufacturing report. If this falls below consensus, however, and shows a deeper plunge into contraction territory, then the ‘Loonie’ would suffer.
The GBP/CAD exchange rate will remain sensitive to the UK’s handling for the coronavirus crisis. However, if the Government indicates a pathway toward opening the economy in the next few weeks, then the Pound could rise higher.
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