Pound Canadian Dollar Exchange Rate Avoiding Losses despite UK Coronavirus Jitters
Investors have been hesitant to sell the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate this week. This is due to weakness in the Canadian Dollar (CAD) as investors avoid assets correlated to commodities, despite the Pound’s (GBP) own woes.
Since opening this week at the level of 1.7287, GBP/CAD briefly dipped lower but has generally continued to trend close to the week’s opening levels.
Last week saw GBP/CAD rebound strongly from near early-December’s multi-month low of 1.6812. It is thanks to a weaker Canadian Dollar that the pair has been able to sustain gains.
The threat of a no-deal outcome to Brexit is still looming over the outlook. However, the Pound to Canadian Dollar exchange rate outlook could improve significantly if a Brexit deal is struck soon.
Pound (GBP) Exchange Rate Outlook Limited by Coronavirus and Brexit Uncertainty
At the beginning of this week, the Pound was throttled by reports of a new more infectious coronavirus strain discovered in South-East England.
While this has since caused more global risk-aversion in markets, the concerns are still weighing on the Pound. Speculation persists that more of the UK economy could see tighter coronavirus restrictions in the New Year.
The Pound is being buoyed by hopes that the UK and EU are closing in on a Brexit deal. However, with just over a week until the end of the Brexit transition period, concerns of a no-deal Brexit loom over the outlook as well.
According to Analysts at MUFG:
‘With many issues now resolved according to reports from Brussels, the haggling over fishing appears to be what still needs to be agreed. If those reports are correct, then surely at this stage, a positive Brexit outcome is most likely.’
Canadian Dollar (CAD) Exchange Rates Weakened by Tumbling Oil Prices
Prices of oil, Canada’s biggest export, have been falling this week.
As a new reportedly more infectious strain of coronavirus Covid19 is discovered in Britain, global markets have been spooked.
The expectation for oil demand to fully recover soon has been dented as a result. This weighed heavily on oil prices and the commodity’s prices are sliding as a result.
Higher US oil inventories further weighed on oil prices. According to Stephen Innes, Chief Market Strategist at Axi:
‘Rubbing salt in the oil market wounds today, oil prices lurched lower after yet another inventory build that was very much bearish to consensus,’
This is dampening market appetite for the oil-correlated Canadian Dollar. The Canadian Dollar’s appeal is also weaker due to concerns over US fiscal stimulus, due to the close relations of the US and Canadian economies.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook Could Strengthen on Brexit Deal
The Pound to Canadian Dollar exchange rate is holding its ground for now, but if a Brexit deal is reached soon the pair’s outlook could recover further.
UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen will have a call regarding the Brexit deal over the coming day. If the UK and EU are able to reach an agreement on fishing issues, a Brexit deal may be mere days away.
If a Brexit deal is reached soon, it would be a big relief for the Pound outlook. This could propel a much stronger recovery in the volatile GBP/CAD.
GBP/CAD may gain even more if market risk-aversion intensifies as well. The Canadian Dollar could weaken if global coronavirus fears worsen and weigh harder on oil prices.
Developments in Brexit and the coronavirus pandemic will likely overshadow tomorrow’s Canadian building permits stats.
Of course, a no-deal Brexit remains a considerable risk. The Pound to Canadian Dollar exchange rate outlook could be hit even lower if the UK and EU are unable to make a deal.