Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls as US-UK Tensions Set to Rise
UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped on Tuesday afternoon, leaving the pairing trading at around CA$1.7111.
The pairing slumped as pessimism gripped the Pound after Prime Minister Boris Johnson made the decision to give Chinese telecoms giant, Huawei restricted access to 5G networks.
This decision is likely to increase tensions between the UK and US President Donald Trump’s administration, sending GBP lower.
Meanwhile, the quick slide in oil prices has alarmed OPEC officials and sources from OPEC have said it wants to extend current output cuts until at least June.
This also comes with the possibility of deeper reductions if demand in China is significantly impacted by the spread of the Wuhan coronavirus.
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted as Brexit Back in Focus
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat as the focus shifted to Brexit, leaving the pairing trading at around CA$1.7197.
Sterling remained under pressure on Tuesday as fears about the UK’s future relationship with the European Union resurfaced.
The focus has shifted back to the UK’s future ties with the bloc, as on Friday, the UK is set to formally leave the EU.
Commenting on this, head of G10 currency strategy at CIBO Capital Markets, Jeremy Stretch noted:
‘It’s been a case that Brexit issues have been off the agenda for a while, but there are now some signs of friction between the two sides as negotiations are gearing up, and that might be a source of consternation.’
Added to this, Thursday’s upcoming Bank of England (BoE) has left the currency under strain as the chance of a rate cut remain uncertain.
At the start of the week, markets priced the chance of a cut at around 55%, down from 70% a week earlier.
CAD Flat as Oil Futures Steady After Five Days of Declines
The Canadian Dollar remained flat against the Pound on Tuesday after oil futures steadied after five days of declines.
Earlier declines were due to fears the continuing threat of the Wuhan coronavirus would weigh on oil demand. However, some analysts have argued the falls may be overdone.
Oil investors are concerned by the current travel advisories and restrictions. Added to this, the impact this could have on China’s economic growth would see weaker demand for crude oil and products despite the plentiful supply.
Barclays has said it expects OPEC+ to take further steps to support the oil market if the fall in demand is worse than anticipated.
In a statement, Barclays added:
‘If air passenger traffic in China declined by half in first quarter of 2020, it would likely lead to a 300,000 barrels per day year-on-year decline in jet-kerosene demand.
‘While it remains to be seen how quickly the spread of the virus is contained, experience from the 2003 SARS outbreak suggests demand worries are likely overdone.’
Pound Canadian Dollar Outlook: Thursday’s BoE Meeting in Focus
Looking ahead, the main focus for markets will be this week’s Bank of England (BoE) meeting.
The Pound (GBP) is likely to suffer losses against the Canadian Dollar (CAD) if the chance the BoE will cut rates increases.
Meanwhile, the oil-sensitive ‘Loonie’ is likely to benefit from any gains in oil prices.
If oil futures continue to steady and prices edge higher, the Pound Canadian Dollar (GBP/CAD) exchange rate is likely to slide.