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Pound Canadian Dollar to Retreat from Recent Highs amidst Uptick in Oil Prices, Rising UK Political Uncertainty

Oil Price

GBP/CAD Exchange Rate Subdued as Brent Crude Holds at $64  

The Pound Canadian Dollar (GBP/CAD) exchange rate is currently trading sideways as oil prices hold close to a two-month high.

At the time of writing the GBP/CAD exchange rate is trading at around CA$1.7046, virtually unchanged from this morning’s opening levels.

Stronger Oil Prices to Underpin a Rebound in the Canadian Dollar (CAD)?

After struggling in recent months, the Canadian Dollar’s (CAD) outlook has brightened over the past couple of weeks with hopes it could maintain its upward trajectory as he head into 2020.

The rebound in the commodity-sensitive ‘Loonie’ is a large part in thanks to a sustained pick up in oil prices, as Brent crude currently trades at a two-month high at over $64 a barrel.

The rally in crude prices comes amid reports that the Organization of the Petroleum Exporting Countries (OPEC) will unanimously vote to extend its oil output cuts when its members meet in Vienna next week.

Providing further upside in CAD exchange rates has been some robust domestic data and the Bank of Canada’s (BoC) recently signalling that it will leave rates on hold for the time being.

Analysts at Citibank suggest:

‘Although the October Bank of Canada (BoC) was more dovish than expected with the Bank’s 2020/21 GDP forecasts lowered and an emphasis placed on the downside risks of trade wars, the domestic Canadian economy remains resilient and the BoC is on hold, which supports CAD.’

However some economists aren’t ready to rule out a near-term rate cut from the BoC just yet, warning that global risks could force action from the bank, at which time we will see CAD strength begin to erode.  

Pound (GBP) Faces Pressure as Odds of a Hung Parliament Grow

Having shown remarkable resilience in the weeks since the general election was called, the Pound (GBP) is starting to show signs of weakness as political jitters grow.

The main concern for GBP investors is whether the Conservatives will be able to secure a majority when voters go to the polls on 12th December.

While the Tories remain ahead of Labour, recent opinion polls have shown this lead has begun to be eroded after the launch of the Tory manifesto failed to make waves.

Markets fear that should Boris Johnson fail to secure a majority next month then parliament will be left deadlocked over Brexit.