Pound Canadian Dollar Exchange Rate Struggles to Keep Climbing as US Outlook Boosts CAD
While market sentiment has been volatile in recent sessions, higher optimism about the US economy in particular is limiting demand for the Pound Canadian Dollar (GBP/CAD) exchange rate. The Pound (GBP) has also been dampened by some surprising Bank of England (BoE) news.
GBP/CAD has seen high volatility in recent weeks. Last week saw GBP/CAD briefly touch on a monthly high of 1.7368 before plunging and closing the week at around a 2021 low of 1.7168.
Since markets opened this week, GBP/CAD has been attempting to rebound. However, today’s rebound attempt was stopped short in the afternoon and GBP/CAD has only climbed to around 1.7255 as of the time of writing.
Pound (GBP) Exchange Rates Shocked by Andy Haldane’s BoE Departure
This morning, the Pound’s appeal was boosted by some stronger than expected UK growth data from February.
However, the Pound’s advances faced some fresh uncertainties this afternoon. Markets were surprised by news that Bank of England (BoE) Chief Economist Andy Haldane had suddenly resigned.
Haldane had been given another 3-year term just last year, so news that he would be stepping down this summer was a surprise to markets. The news weakened Sterling slightly, as Haldane was among the bank’s more hawkish members.
Canadian Dollar (CAD) Exchange Rates Find Support in US Strength, Oil Prices
The Canadian Dollar (CAD) is a currency often correlated to market sentiment for risk and trade. It is especially strongly correlated to trade, due to Canada’s economy relying heavily on exports.
In particular, oil prices are often correlated to CAD movement. As a result, rising oil prices today boosted Canadian Dollar demand slightly.
Another reason for Canadian Dollar strength today is rising market speculation that US inflation is rising, leading to speculation of tighter monetary policy from the Federal Reserve.
This is because Canada’s economy has a close relationship with the US economy. The Canadian Dollar is strengthening due to expectations for US economic strength.
Analysts also expect Canadian data to show continued strength after last week’s impressive Canadian job market report. According to Shaun Osborne, Chief Currency Strategist at Scotiabank:
‘While we expect some of the jump in jobs to be unwound this month as a result of Ontario’s lockdown moves, the trend in jobs and progress on access to vaccines should provide policy makers with enough confidence in the outlook to at least signal a move towards tapering asset purchases at the April 21st policy decision,’
Pound Canadian Dollar (GBP/CAD) Exchange Rate Looks to US Strength, Canadian Data
The Pound to Canadian Dollar exchange rate is likely to be driven more by shifts in Canadian Dollar sentiment in the coming days.
While Andy Haldane’s departure has the potential to dampen the Pound outlook, optimism about Britain’s economic recovery from the coronavirus pandemic is likely to persist.
This leaves Sterling fairly well positioned overall. Unless the Canadian Dollar strengthens, GBP/CAD may be in for further gains.
Still, the Canadian Dollar remains appealing as well. If Canadian manufacturing data or ADP employment stats impress on Thursday, or Canadian wholesale sales on Friday, the Canadian Dollar could be even more appealing.
On the other hand though, fresh weakness in the US outlook or upcoming Canadian data could dent the Canadian Dollar’s recent appeal. This could make it even easier for the Pound Canadian Dollar (GBP/CAD) exchange rate outlook to improve.