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Plummeting Oil Keeps Pound to Canadian Dollar Exchange Rate Outlook Buoyant

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Pound to Canadian Dollar Exchange Rate Keeps Edging Higher despite Coronavirus Fears 

The Pound (GBP) has been increasingly jittery, but despite this the Pound to Canadian Dollar (GBP/CAD) exchange rate is edging higher. The Canadian Dollar (CAD) continues to see significant weakness as oil prices plummet. 

Still, broad Pound weakness is keeping GBP/CAD from recovering much of last week’s losses. GBP/CAD slumped 5 cents from 1.7510 to 1.6962 last week. 

Despite the Pound’s weakness though, GBP/CAD has recovered around two cents. GBP/CAD trends in the region of 1.7168 at the time of writing on Wednesday. 

The primary cause of movement this week has been continued weakness in the Canadian Dollar. Strongly correlated to oil prices, CAD has been plunging amid plummeting oil and the oil price war.

Pound (GBP) Exchange Rates Struggle to Sustain Gains as Coronavirus Fear Deepens 

The Pound has been climbing against the weak Canadian Dollar this week. However, the British currency is performing quite poorly overall. 

Britain’s coronavirus situation has been worsening and the government is ramping up action as a result. Fears are now rapidly rising over Covid-19’s potential impact on UK economic activity and even Brexit negotiations. 

Yesterday’s fiscal stimulus plans from UK Chancellor Rishi Sunak were not enough to impress markets. As a result, the Pound’s movement is limited as investors await more news. 

Coronavirus uncertainty is leaving the Pound unpopular as a funding currency. According to Strategists at UBS Wealth Management: 

‘The main reason for Dollar (USD) demand is liquidity concerns as in volatile times, companies and investors need dollars to settle transactions and as long as these concerns persist, we expect the Pound to remain on the back foot,’ 

Canadian Dollar (CAD) Exchange Rates Continue to Fall as Oil Prices Plummet 

The Canadian Dollar has been unable to benefit from this week’s Pound weakness, as it continues to slump across the board. 

CAD is a currency correlated to risk and trade sentiment. It is especially sensitive to movements in oil prices, due to oil being Canada’s biggest export.

As the coronavirus outbreak has hit oil prices hard, the Canadian Dollar is among the currencies suffering most from the pandemic. An oil price war has broken out amid Covid-19’s spread, which has only further weakened the commodity and CAD. 

US crude oil prices have lost around half their value this year so far, falling from over US$60 to under $30 since January. 

Pound to Canadian Dollar (GBP/CAD) Exchange Rate May Brush Over Canadian Inflation 

Due to the market’s significant focus on the coronavirus pandemic and the oil price war, upcoming Canadian data may not influence GBP/CAD much. 

Canadian inflation rate data from February is due for publication this afternoon. Canadian retail sales results are due on Friday. 

Overall though, even if these stats impress they may not give the Canadian Dollar much notable support. 

The Canadian Dollar will instead remain driven by developments in oil prices and the oil price war. If there is any fresh sign of oil producers reaching a truce on oil prices and production, CAD could see a bounce in demand even if coronavirus jitters persist.

As for the Pound, Pound investors are eagerly awaiting more fiscal stimulus news and action from the UK government. 

If the government ramps up action and this impresses investors, the Pound to Canadian Dollar (GBP/CAD) exchange rate is more likely to sustain gains.