GBP/CAD Exchange Rate Falls as UK Economic Outlook Darkens on Brexit and Covid-19 Uncertainty
The Pound Canadian Dollar exchange rate dipped today after the UK economy grew by a record 15.5% in the third quarter but began to slow in September. The pairing is currently trading around CA$1.723.
Consequently, Sterling traders have become more concerned about the British economy going into 2021. Brexit uncertainty and the Covid-19 situation are likely to push the nation into a recession.
Sam Cooper, the Vice President of Market Risk Solutions at the Silicon Valley Bank, commented on today’s data:
‘Despite the headline indicating record growth in the third quarter, the reading is actually a mild disappointment, with the number missing market consensus.
‘The weaker than expected print will put the brakes on the recent sterling rally and will provide a reality check for the market and will highlight lingering headwinds for the pound in the form of ongoing Brexit negotiations and the growing economic impact of the pandemic.’
UK Chancellor Rishi Sunak has also warned that there are still hard times ahead for the British economy, highlighting the slowing down of economic growth in autumn.
Brexit remains a concern, with no further signs of progress between UK and EU trade talks leaving UK markets uncertain.
However, if we see some signs of progress towards a trade agreement between the two sides, then the GBP/CAD exchange rate would head higher.
Canadian Dollar (CAD) Rises on Increased Oil Prices
The Canadian Dollar edged higher today after oil prices struck a two-month high, buoying the commodity-linked ‘Loonie’ as investors become more optimistic about Canada’s economy.
Covid-19 vaccine news has particularly given a spur to oil prices, with WTI crude futures posting a 13% rise this week.
Pharmaceutical giant Pfizer released clinical trial data which indicated that a Covid-19 vaccine trial had proven 90% effective.
Furthermore, with the US elections effectively wrapped up, with Democrat Joe Biden the next US President-elect, global economic markets have stabilised.
However, President Donald Trump insists on several state recounts.
This evening will see a speech from the Bank of Canada’s (BoC) Senior Deputy Governor Carolyn Wilkins.
Any downbeat comments about the Canadian economy would prove CAD-negative.
GBP/CAD Forecast: Could Rising Oil Prices Boost the Canadian Dollar?
Pound traders will be awaiting tomorrow’s speech from the Bank of England’s (BoE) Governor, Andrew Bailey.
Again, if the Bank is notably downbeat about the outlook for the British economy, Sterling would suffer.
Brexit news will also remain in focus this week. As a result, we could see GBP head higher on hopes of a post-Brexit trade agreement between the UK and the EU.
The GBP/CAD exchange rate could remain subdued, however, if oil prices continue to rise and boost the Canadian Dollar.
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