Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises despite Optimism Over Further OPEC+ Cuts
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate edged 0.3% higher on Tuesday. This left the pairing trading at around CA$1.7146.
The oil-sensitive ‘Loonie’ slipped on Tuesday morning despite oil prices making marginal gains today.
Prices reversed earlier losses as hopes for further cuts to crude supplies offset fears of a second wave of the coronavirus pandemic.
Fears of a second wave weighed on prices at the start of this week’s session as a resurgence of cases could batter fuel demand.
Monday saw the global Covid-19 cases jump to more than eight million, as infections increase in Latin America. Added to this, the United States and China are dealing with new outbreaks.
In a note, Stephen Innes, Chief Global Markets Strategist at AxiCorp wrote:
‘While the run of COVID-19 headlines emphasise that a demand recovery is likely to be a slow process, it seems unlikely that we see a return to the lockdown measures of 1H.’
However, the slide in oil prices was cut short thanks to hopes of further cuts in oil supplies from major oil producers.
Monday saw the United Arab Emirates’ energy minister express confidence that OPEC+ members would up their game to support markets.
OANDA’s senior market analyst, Edward Moya noted:
‘Renewed optimism that OPEC+ production cuts could remain in place if we see second-wave [coronavirus] concerns intensify have oil prices refusing to enter freefall.’
Sterling (GBP) Rises as Furlough Scheme ‘Cushioned’ Blow to Labour Market
The Pound was able to edge higher against the Canadian Dollar despite data showing the number of people on British company payrolls slumped by more than 600,000 in April and May.
The latest data showed that as the coronavirus lockdown hit Britain’s labour market, the number of vacancies plummeted by the most on record.
Job vacancies suffered the largest quarterly fall on record, with vacancies tumbling -342,000 to 476,000.
However, the country’s unemployment rate held steady at 3.9% in the three months to April. This comes despite a record decrease in overall economic output, which offered GBP some support.
Economists had expected an increase in the unemployment rate to around 4.7%, although many firms turned to the government’s furlough scheme to keep employees on their books.
According to Tej Parikh, chief economist at the Institute of Directors:
‘The furlough scheme continues to hold off the bulk of job losses, but unemployment is likely to surge in the months ahead.’
Deloitte’s senior economist, Debapratim De noted:
‘The headline unemployment data suggests that the furlough scheme has cushioned the initial blow to the labour market, despite the sharp contraction in activity in April. However, a well-above-average rise in jobless benefit claims in May and the downward trend in employment observed in the last two weeks of April point to a future uptick in unemployment.’
Pound Canadian Dollar Outlook: Inflation in Focus
Looking ahead to Wednesday, the Pound (GBP) could suffer some losses against the Canadian Dollar (CAD) following the release of May’s inflation data.
If Britain’s inflation rate eases further below the Bank of England’s (BoE) target than expected, it will weigh on Sterling.
Meanwhile, the ‘Loonie’ could also be left under pressure on Wednesday following the release of May’s inflation rate.
If Canada’s annual inflation stagnates or plummets, it will weigh on CAD and leave the Pound Canadian Dollar (GBP/CAD) exchange rate will remain flat.