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GBP/CAD Exchange Rate Faces Additional Pressure as Oil Prices Rise

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GBP/CAD Exchange Rate Weakens as Crude Prices Strengthen

The Pound (GBP) fell against the Canadian Dollar (CAD) this morning amidst a rise in oil prices. Crude oil, one of Canada’s major exports, traded near 3-year highs of almost $73.5.

Conversely, GBP sentiment has taken a dive in the wake of yesterday’s Bank of England (BoE) interest rate decision, which saw the bank leave its monetary policy untouched despite fast-rising inflation.

Canadian Dollar (CAD) Set to Gain Further, WTI Target $75 per Barrel

The Canadian Dollar (CAD) remains well supported this morning, reflecting the current strength of oil prices, which have risen 11.06% this month. Demand for crude oil is increasing as the global economy begins to recover, with transport and manufacturing sectors in particular dependent upon fossil fuels to increase their output.

 The ‘Loonie’ is also supported by the Export Development Trade Confidence Index, which reported a 19% rise – the highest in the last 20 years. Wholesales Sales also grew 1.1% MoM in May and Manufacturing Sales rose 1% after a 2.1% drop in April.

The performance of the US Dollar (USD) is also favouring CAD exchange rates this morning. Mixed economic data, alongside the dovish tone struck by the Federal Reserve, have capped USD gains this past fortnight. The Canadian Dollar is particularly sensitive to ‘Greenback’ performance, as ‘the ‘Loonie’ [typically suffers] as a result of US Dollar strength.’

Pound (GBP Suffers on Bank of England’s (BoE) Dovish Turn

Yesterday’s dovish announcement from the BoE seems to dominate GBP sentiment today.

Investors were put on the defensive yesterday afternoon as the Bank of England announced interest rates would remain at a record low of 0.1% and quantitative easing at £875m. Leading economists were divided over the decision, as were policymakers, with concerns that inflation could get out of control dominating sceptics’ discourse.

Sterling sentiment is also dented by rising numbers of Coronavirus cases as the rogue Delta variant spreads across the United Kingdom. Developments in this field may further tip the currency pair in favour of CAD in the coming days. Coronavirus cases in Canada continue to drop, although it lags behind the UK in numbers of vaccine doses delivered, at 89.3 per 100 people as opposed to Britain’s 112.6.

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