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Pound Canadian Dollar Exchange Rate Rises as Sinking Oil Prices Weigh on ‘Loonie’

GBP/CAD Exchange Rate Rises as Canadian Unemployment Rises in February

The Pound Canadian Dollar (GBP/CAD) exchange rate rose by 0.5% today, with the pairing currently trading around CA$1.743 as the oil-sensitive ‘Loonie’ continues to suffer from plunging oil prices amid rising coronavirus (COVID-19) fears and production cuts.

The Organisation of Petroleum Exporting Countries (OPEC) said in its statement that COVID-19 has ‘had a major adverse impact on global economic and oil demand forecasts in 2020, particularly for the first and second quarters.’

The Canadian Dollar (CAD) has also struggled following OPEC’s proposal to cut production to compliment slowing global growth. As a result, ‘Loonie’ investors have become increasingly jittery on the prospect that the Canadian economy could lose out in the next few months.

Today also saw February’s Canadian unemployment rate rise from 5.5% to 5.6%, leaving investors wary of the Canadian Dollar as its economy struggles.

However, while the Bank of Canada’s Governor, Stephen Poloz, said that Canada’s labour market was performing well, the coronavirus threatens to seriously test the economy in the near-term.

GBP/CAD Exchange Rate Edges Higher as BoE Rate Cut Odds Ease Off

The Pound (GBP) has gained today on lessening odds of a Bank of England (BoE) rate cut after Andrew Bailey, the forthcoming Governor of the BoE, said that the bank required ‘more evidence’ on how the coronavirus could affect the British economy before it cuts interest rates.

Andrew Bailey commented:

‘I think frankly what we need is more evidence than we have at the moment as to exactly how this is feeding through. We have a building picture of evidence, the Bank has been working extremely hard on it and I have been engaged on that this week. And I think then we can reach that judgement.’

Today also saw the UK’s Halifax House Prices report sink below forecasts in February, with the figure falling from 4.1% to 2.8%.

Halifax Managing Director Russell Galley was downbeat in his assessment, saying:

‘Looking ahead, there are a number of risks, including the potential impact of coronavirus, which continue to exert pressure on the economy and we wait to see how these will affect housing market sentiment later in the year.’

The GBP/CAD exchange rate’s gains today are likely to be short-lived, with coronavirus developments remaining in focus and likely to increase the odds of a BoE rate cut in the coming weeks.

GBP/CAD Outlook: Could Sterling Sink on Coronavirus Fears?

Pound (GBP) investors will be looking ahead to Tuesday’s release of the UK BRC Like-For-Like Retail Sales report for February. Any signs of improvement in Britain’s retail sector would boost Sterling with a brightening economic outlook for the UK.

The Canadian Dollar (CAD) will continue to be driven by oil prices and coronavirus developments. If we see any evidence that global trade could be disrupted, this would weaken the appeal of the risk-sensitive ‘Loonie’.

The Bank of England (BoE) will remain a key mover of the GBP/CAD exchange rate next week. Consequently, we could see the Pound begin to lose its gains if the odds of a rate cut increase.