Pound Canadian Dollar (GBP/CAD) Exchange Rate Falls on UK Concerns and Rising Oil
The Pound Canadian Dollar (GBP/CAD) exchange rate slipped this morning as UK economic and political woes continue to pressure the Pound (GBP).
Meanwhile, the crude-linked Canadian Dollar (CAD) is enjoying a pick-up in oil prices.
Pound (GBP) Faces Rough Waters
The Pound slipped this morning after data from the Institute of Directors showed a sharp drop in confidence among UK business leaders.
The Institute’s Economic Confidence Index sank to its lowest score since October 2020. Business leaders cited surging inflation and the impact of Brexit on trade as the key reasons for the pessimistic outlook on the UK economy.
Kitty Ussher, Chief Economist at the Institute of Directors, said that the twin threats of high inflation and Brexit disruption are deterring investment:
‘Disappointment in the performance of the UK macroeconomy, in particular around inflation but also in the everyday impact of Brexit, is affecting the very real investment decisions of business leaders.
‘We can now see a clear connection between the slide in the confidence that directors have in the UK macroeconomy and a trend of increasing caution around investment.’
Looking ahead, Sterling’s outlook isn’t much better. Political uncertainty could continue to hurt GBP exchange rates as the beleaguered Prime Minister Boris Johnson tries to shore up support in the wake of the ‘partygate’ report.
If enough Tory MPs submit letters of no confidence, the government could face a leadership crisis at a challenging time for the country.
In the UK, Thursday and Friday are bank holidays to celebrate the Queen’s Platinum Jubilee. As a result, GBP trading conditions could be thin, which may leave Sterling open to more losses.
BoC in Focus for Canadian Dollar (CAD)
Meanwhile, the Canadian Dollar has risen today as a spike in oil prices boosted the commodity-linked ‘Loonie’.
After pulling back yesterday, today WTI crude jumped from just shy of $115 up to $116.50 a barrel.
CAD gains may be limited ahead of the Bank of Canada (BoC) interest rate decision this afternoon, however. Investors may be rather hesitant to place aggressive bets.
Economists expect the BoC to hike interest rates by 50 basis points once again. This would bring the central bank’s overnight rate to 1.5%.
The Canadian Dollar could rise if the bank hikes rates, although it is likely already priced into the currency. Therefore, CAD investors will be more interested in the bank’s forward guidance. If the BoC signals that it plans to keep aggressively tightening monetary policy, CAD could climb.