Pound to Canadian Dollar Exchange Rate Edges Higher as Risk-Off Hits CAD
The Pound to Canadian Dollar (GBP/CAD) exchange rate is climbing this morning. While more resilient than other currencies correlated to trade, the Canadian Dollar (CAD) has still been hit by this morning’s reaction to weekend coronavirus developments.
It follows a week of strong performance for CAD. After opening last week at the level of 1.7289, GBP/CAD spent most of the week tumbling. GBP/CAD even touched touched on a monthly low of 1.7074 towards the end of the week.
GBP/CAD climbed back from those worst levels, but still ended the week lower in the region of 1.7133. At the time of writing on Monday morning, GBP/CAD is still seeing steady gains and trends in the region of 1.7152.
The Pound (GBP) lacks the supported needed for a stronger performance. However, the Pound to Canadian Dollar outlook remains higher as coronavirus jitters increasingly dominate the outlook.
Pound (GBP) Exchange Rates Slightly Stronger than Rivals on Coronavirus Jitters
The Pound is a little stronger than the Canadian Dollar this morning. However, the British currency is still weak overall.
Investors are rushing into safer currencies, the safe haven US Dollar (USD) seeing particularly strong gains. The Pound is among the currencies falling as investors look for safer investments.
However, as the Pound is not as strongly correlated to global risk and trade as currencies like the Canadian Dollar, it has been more appealing than CAD today.
Sterling’s domestic support is mixed. Data was strong last week, but Brexit uncertainties and concerns that the UK budget will not be as bullish as hoped are limiting the British currency’s appeal.
EU officials recently indicated that Britain’s financial sector will not receive special treatment in any post-Brexit UK-EU deal. On top of this, Britain’s new Chancellor is speculated to be under pressure to not offer as much government spending in the upcoming budget as markets hoped.
Canadian Dollar (CAD) Exchange Rates Down as Coronavirus Fears Hit Oil Prices
The Canadian Dollar is starting this week off on a weaker note. As markets react to the weekend’s news that the coronavirus outbreak has spread much more than expected, investors are selling assets correlated to trade.
While the Canadian Dollar is typically more resilient than other risk and trade-correlated currencies, it is being pushed lower by commodity news today.
Prices of oil, Canada’s most lucrative commodity, have slumped US$2 per barrel. Oil prices have been weaker on concerns that the virus spread will damage global demand for the commodity.
According to Warren Patterson, Head of Commodity Strategy at ING:
‘Travel restrictions and factory shutdowns caused by Covid-19 are already leading to big problems for oil-producing countries. We believe the virus’ effect on oil demand will shave some 400,000 barrels a day from global consumption growth, taking us to the lowest level in nearly a decade.’
As a result of falling oil prices and last week’s underwhelming Canadian retail sales results, the Canadian Dollar is unappealing today.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate to Focus on Global Developments
While there is key Canadian data due for publication at the end of the week, the Pound to Canadian Dollar (GBP/CAD) exchange rate is likely to be driven by global factors in the coming days.
Britain’s economic calendar will be much quieter this week. As a result, the Pound will be driven by political factors. According to analysts at ING:
‘A quiet week in terms of data releases is going to leave space to the other two key drivers of GBP: UK-EU trade negotiations and hints about the content of the upcoming UK budget,
We suspect both will hardly come to the support of the Pound, as the negotiations may enter an even more confrontational phase and the government is unlikely to endorse market’s high fiscal hopes.’
In the event there are no surprising Brexit or budget developments, GBP/CAD may be driven more by the Canadian Dollar.
CAD is being driven by coronavirus and oil price developments this week already. Further developments in these areas are likely to lead to further market movement.
If the coronavirus spread continues to worsen, oil prices may tumble further. This would make it keep the Canadian Dollar outlook low and the Pound to Canadian Dollar (GBP/CAD) exchange rate would more easily avoid losses.