GBP/CAD Exchange Rate Rises Despite Multi-Year High Oil Prices
The Pound Canadian Dollar exchange rate rose today as the ‘Loonie’ is suffering as a result of US Dollar strength following a hawkish US Federal Reserve monetary policy statement. The pairing is currently fluctuating around CA$1.72.
Yesterday’s release of the latest Canadian consumer price index (CPI) data for May – which rose by 3.6% – has failed to buoy the CAD/GBP exchange rate in today’s session.
Canada’s inflation rate is now at its highest level in a decade thanks to the nation’s economic recovery.
TD Bank’s economist James Marple commented:
‘We’re past the heating up stage now. Inflation in Canada is hot.’
Economist Avery Shenfeld, CIBC, also commented on the data:
‘Prices look elevated compared to where they were a year ago, but that’s because prices a year ago were rock-bottom levels … in the throes of the first wave of COVID.’
‘We really haven’t had that much inflation if you measured prices relative to where they were in the spring of 2019.’
Oil prices are currently at multi-year highs, buoying demand for the commodity-linked Canadian Dollar.
However, even with WTI crude selling at around $71.84 per barrel, CAD investors are remaining cautious as the Delta Covid-19 variant runs rampant through the UK.
Pound (GBP) Exchange Rate Rises on Stronger-Than-Expected UK Inflation
The Pound (GBP) continued to rise today thanks to a stronger-than-expected rise in the latest UK inflation gauge for May.
Inflation beat forecasts, rising by 2.1% and beating the Bank of England’s (BoE) target of 2%.
James Smith, the developed markets economist at ING, commented on the data:
‘UK core inflation leaped to 2% in May, wildly surpassing expectations and marks a considerable jump from 1.3% in April. While an element of this is down to base effects – though more so on the energy side – given the annual comparison compares to the depths of the pandemic, that’s only really part of the story here.’
Concerns over the UK’s rising cases of the Delta Covid-19 variant have however begun to limit the appeal of Sterling.
Now that the UK Government has delayed the full easing of lockdown measures this month until July, we could see the nation’s economic recovery slow down.
As a result, the GBP/CAD exchange rate remains volatile as UK market mood increasingly sours as Covid-19 cases and hospitalisations continue to rise.
GBP/CAD Exchange Rate Forecast: Could Rising Oil Prices Uplift the Canadian Dollar?
Pound (GBP) traders are awaiting tomorrow’s UK retail sales data for May, which is expected to rise by 29% year-on-year, while the month-on-month figure is forecast to rise by 1.6%.
Any signs of an improvement in the UK’s retail sector would be GBP-positive.
If Covid-19 cases rise in the UK, however, then we could see Sterling struggle.
However, we could see the Canadian Dollar Pound exchange rate edge higher if oil prices continue to rise, buoying demand for the commodity-linked ‘Loonie’.