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GBP/CAD Exchange Rate Climbs as Crude Prices Decline on Oversupply

Canadian Dollar Currency Forecast
  • UK Pound exchange rates mixed after manufacturing data disappoints
  • Canadian Dollar exchange rates dive as oil prices weaken
  • Damp risk appetite adds to ‘Loonie’ (CAD) headwinds
  • GBP/CAD exchange rate forecast to hold gains

Pound Sterling (GBP) Exchange Rates Forecast to Hold Position of Strength despite Soft Manufacturing Data

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate strengthened by around 0.4% on Tuesday afternoon.

In the initial stages of Tuesday’s European session the UK Pound extended gains versus all of its major peers. The appreciation was the result of continuous improving sentiment, as ‘Brexit’ concerns ease in line with favourable opinion polls. Additionally, heavy-weight politicians campaigning for the UK to remain a member of the European Union considerably outnumber those trying to persuade Britons to vote to leave.

However, as Tuesday’s European session progresses the UK unit dropped from intraday highs to post considerable losses against both the US Dollar and the Euro.

The UK Pound’s depreciation was in reaction to particularly disappointing domestic data. April’s Manufacturing PMI failed to meet with the median market forecast rise from 50.7 to 51.2, with the result actually dropping to 49.2. The drop below the 50 mark that separates growth from contraction was a surprise to analysts. Whilst manufacturing only accounts for a small portion of the UK’s gross domestic product, the weak output adds extra pressure on the services sector to prop up British growth.

In response to the UK’s manufacturing data, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply said; ‘Recent fears over a stall in the UK’s manufacturing sector have now become a reality and driven the steepest decline in the manufacturing PMI for three years. An atmosphere of deep unease is building throughout the manufacturing supply chain, eating away at new orders, reducing British exports and putting more jobs at risk. A sense of apprehension across the sector is being caused by enduring volatility in the oil and gas industry, falling retailer confidence and the uncertainty created by the EU referendum. In a month that saw the collapse of BHS, the troubles in the British High Street are being felt just as keenly in Britain’s factories. Manufacturers are compensating for stalling new order growth by depleting their stocks, and dramatically cutting the amount of raw materials they buy from suppliers.’

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.8448.

Canadian Dollar (CAD) Exchange Rates Struggle despite Reduced Federal Reserve Rate Hike Bets

Although a string of weak US ecostats has significantly reduced bets regarding the timing of a Federal Reserve rate hike, the Canadian Dollar has failed to sustain any significant appreciation of late.

Oil prices recently hit 2016 highs following US data that showed smaller-than-expected stockpiles. However, the price of crude resumed depreciation in response to signs of greater production from OPEC and non-OPEC countries.

Ahead of the drop in crude prices, analysts at Deutsche Bank predicted the depreciation, stating; ‘A sustainable rise in OPEC production may be just around the corner, and…the rally may pause. Maintenance in the UAE at fields … is scheduled to end in April, implying a rise from current production of 2.73 million barrels per day (bpd) to the previous 2.91 million bpd production rate in May.’

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate dropped to a low of 1.8348 during Tuesday’s European session.

GBP/CAD Exchange Rate Forecast: Poloz Speech to Provoke Volatility

With crude oil prices showing little sign of a swift recovery, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is likely to hold gains for the remainder of Tuesday’s European session.

With that said, however, the speech from Bank of Canada’s (BoC) Governor Stephen Poloz has the potential to cause GBP/CAD exchange rate volatility.

Looking further ahead, the UK’s Construction PMI will be of significance on Wednesday. This is especially true given the weak manufacturing sector and the added pressure on services to outperform economists’ expectations.

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate reached a high of 1.8471 during Tuesday’s European session.