Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls as Oil Prices Edge Higher
UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped by around -0.4% this afternoon. This left the pairing trading at around CA$1.7607.
The oil-sensitive ‘Loonie’ received an upswing of support after oil prices edged higher.
Investors hoped that a large build-up in US inventories would mean producers have little option but to cut output further as the coronavirus pandemic throttles demand.
According to Stephen Innes, chief global markets strategist at AxiCorp:
‘The massive storage build, as counterintuitive as it sounds, did provide some price support as the build foreshadows that more wellhead closures are just around the corner, which effectively trims US supply.’
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls despite ‘Oil Price Shock’
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slipped by around -0.3% on Thursday morning. This left the pairing trading at around CA$1.7588.
The Canadian Dollar (CAD) was able to edge higher today despite comments from the top prospect to become the next Bank of Canada (BoC) governor.
According to Tiff Macklem the slump in global oil prices is likely to outlast the coronavirus outbreak, and weigh on the Canadian economy for years to come.
Last weekend saw OPEC+ agree to record oil supply cuts in order to support prices, which fell to an 18-year low in March.
Macklem noted:
‘Even if the oil price war can be resolved, the collapse in global demand as a result of the pandemic suggests oil prices could be weaker for at least a few years.
‘This oil price shock could certainly last longer than the virus.
‘Oil is our biggest export. […] It’s like, as Canadians, we all just got a big wage cut.’
Meanwhile, yesterday saw the BoC state the coronavirus pandemic was set to trigger the largest-ever near-term domestic slump.
However, the bank did express optimism the economy could begin to re-open in June which likely boosted the ‘Loonie’.
Sterling (GBP) Slides as UK Retail Sales Plummet 27%
The Pound suffered losses today after the British Retail Consortium (BRC) stated that UK retail sales plummeted by a quarter in the first two weeks of lockdown.
In the clearest sign so far, the UK has been hit by coronavirus, sales slumped by 27%.
According to BRC chief executive, Helen Dickinson:
‘The closure of non-essential shops led to deserted high streets and high double-digit declines in sales which even a rise in online shopping could not compensate for.’
Meanwhile, the head of the International Monetary Fund (IMF), Kristalina Georgieva said that due to the coronavirus uncertainty the UK should request an extension to its post-Brexit transition period.
Speaking to BBC Radio earlier today, Kristalina Georgieva said:
‘It is tough as it is. Let’s not make it any tougher.
‘My advice would be to seek ways in which this element of uncertainty is reduced in the interests of everybody, of the UK, of the EU, the whole world.’
This came just after the IMF’s warning that the world economy was on track for the steepest downturn since the Great Depression in the 1930s.
The decrease in risk appetite, caused traders to flock back to the safety of the US Dollar (USD) and away from the riskier Pound.
Pound Canadian Dollar Outlook: Canadian Unemployment in Focus
Looking ahead, the Pound (GBP) is likely to suffer further losses against the Canadian Dollar (CAD) if risk appetite continues to fall.
If traders continue to flock back to the safe-haven US Dollar and focus on the economic impact as well as Brexit, Sterling will suffer losses.
Meanwhile, Friday’s Canadian ADP employment change data could leave the risk-sensitive ‘Loonie’ under pressure.
If the number of Canadians out of work increases more than expected, it will weigh on CAD and leave the Pound Canadian Dollar (GBP/CAD) exchange rate largely flat.
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