Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rallies on BoE’s Optimistic Economic Forecasts
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rallied by 0.6% on Thursday. This left the pairing trading at around CA$1.7508.
Sterling received a boost on Thursday after the Bank of England’s (BoE) latest economic forecasts were less pessimistic than expected.
This boosted the currency as the economy is only expected to contract by -9.5% in 2020. While this would be the worst slump in 99 years, earlier forecasts expected the economy to see its worst performance in over 300 years.
While policymakers expect the downturn to be less severe than -14.5% estimates in May, the bank believes the jobless rate will double.
Unemployment in Britain is expected to jump to 7.5% by the end of 2020. Added to this, it will take longer for the economy to return to pre-coronavirus levels.
The bank’s governor, Andrew Bailey said the country now faces some ‘very hard yards’ and the unemployment forecasts are a ‘very bad story’.
Canadian Dollar (CAD) Struggles as Oil Prices Hover Near Five-Month Highs
The oil-sensitive ‘Loonie’ struggled to make gains against the Pound despite oil prices edging just below five-month highs today.
Oil prices were boosted by a weaker US Dollar and falling US crude inventories. Although this was capped by worries about fuel demand.
After the Energy Information Administration reported a larger-than-expected decline in crude inventories the two benchmarks jumped to the highest level since 6 March. This completed a four-day rally and supported the oil-sensitive CAD.
Prices were further supported as a Reuters poll found that analysts expect the US Dollar will continue to slide into 2021. A weaker USD boosts oil prices which supports the ‘Loonie’.
Commenting on this, OANDA’s senior market analyst, Jeff Halley said:
‘Asia today, with a light data calendar and no headlines of note, appears to be content to range trade. Thus we are seeing both Brent and WTI flip-flopping each side of unchanged […] with no overriding theme.
‘I expect that state of affairs to spill over into Europe, unless the US Dollar tracks lower aggressively again, in which case oil should grind higher.’
Pound Canadian Dollar Outlook: Canadian Unemployment in Focus
Looking ahead to Friday, the Pound (GBP) could extend its gains against the Canadian Dollar (CAD) following the release of the latest UK house prices.
If Halifax’s House Price Index rallied in July, it will boost Sterling.
Meanwhile, ‘Loonie’ traders will be focused on the latest Canadian unemployment data on Friday afternoon.
The Canadian currency could rebound against the Pound if data reveals the country’s unemployment rate has fallen more than expected. This will leave the Pound Canadian Dollar (GBP/CAD) largely flat.