GBP/CAD Exchange Rate Rises as Oil-Sensitive ‘Loonie’ Struggles Ahead of US Fed Rate Decision
The Pound Canadian Dollar (GBP/CAD) exchange rate rose today as sliding oil prices have driven away demand for the oil-sensitive ‘Loonie’. The pairing is currently trading around CA$1.73.
The price of WTI crude has dropped over the past week as fears over Europe’s rising number of Covid-19 cases has caused a dip in global risk sentiment.
With oil being on of Canada’s major exports, this has limited the appeal of the Canadian Dollar, seeing the CAD/GBP exchange rate dip as a result.
In Canadian economic news, today saw the release of the latest Bank of Canada (BoC) Consumer Price Index figure for February, which fell below forecasts at 1.2%, despite forecasts of a 1.4% increase.
James Marple, an economist at Toronto-Dominion Bank, commented on the data:
‘The Bank of Canada will look past the near-term rise in headline inflation, driven as it is by volatile energy prices and the comparison to the lockdowns in the spring of last year.’
However, CAD investors are hopeful that this evening will see a bullish statement from the US Federal Reserve.
If the Fed is notably more upbeat in its policy, then oil prices would edge higher and boost the Canadian Dollar Pound exchange rate.
Pound (GBP) Struggles Ahead of BoE Rate Decision
The Pound (GBP) struggled to hold onto its strong upward momentum this week, with GBP investors instead looking ahead to tomorrow’s monetary policy statement from the Bank of England (BoE).
Although this week saw positive comments from the BoE’s Governor, Andrew Bailey, Pound traders are becoming more cautious.
UK-EU relations appear to be souring by the day, with the Northern Irish boarder causing a flare-up of legal cases between the two powers.
Added to this, the EU is threatening to withhold Covid-19 vaccine exports to the UK due to concerns over the EU receiving its fair share.
UK Foreign Secretary Dominic Raab was critical of the demands, however, saying:
‘Frankly, I’m surprised we’re having this conversation. It is normally what the UK and EU team up with to reject when other countries with less democratic regimes than our own engage in that kind of brinkmanship.’
Consequently, this has dampened confidence in the UK market, which would suffer if relations between the UK and EU continue to deteriorate.
GBP/CAD Forecast: Could Rising Oil Prices Boost the Oil-Sensitive ‘Loonie’?
Pound (GBP) traders are awaiting tomorrow’s BoE Interest Rate Decision, which is expected to remain at 0.1%.
However, any further bullishness about the UK economy would drive-up the GBP/CAD exchange rate.
Canadian Dollar (CAD) traders will be awaiting tomorrow’s publication of the Canadian ADP Employment Change data for February.
Any improvement in Canada’s jobs situation would be CAD-positive.
The GBP/CAD exchange rate could fall, however, if oil prices rise following the US Federal Reserve’s rate decision later this evening.
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