Despite a stronger UK Consumer Confidence figure the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has slumped sharply today as oil prices continue to rally.
Canadian Dollar (CAD) on Bullish Form as Oil Breaks Back above $35 on Production Cut Rumours
Demand for the Pound (GBP) continued to weaken on Thursday after the fourth quarter UK GDP showed that the economy had slowed from 2.1% to 1.9% on the year. Although there was a modest quarterly uptick this failed to particularly encourage investors to buy back into Sterling, as the service sector was shown to have definitively remained the main driver of domestic growth. This put further pay to George Osborne’s much vaunted desire to rebalance the UK economy, with manufacturing output having stagnated. This weaker showing is also likely to do little to persuade the Bank of England (BoE) to act sooner rather than later on monetary policy, adding to the prospect that interest rates will remain lower for longer.
The Canadian Dollar (CAD), meanwhile, was shored up as global stock markets extended their rally for a second day and oil prices surged back above $35. This was largely in response to reports that Russia and the Organisation of the Petroleum Exporting Countries (OPEC) were considering talks to cut oil production. Although Saudi officials later denied the claims Brent crude, and the ‘Loonie’, remained on bullish form.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Slumps to Two-Month Low on Strong Canadian GDP
Despite a stronger-than-expected GfK Consumer Confidence Survey showing that sentiment in the UK leapt from 1 to 4 in January, in defiance of the generally muted mood on markets at the start of the year, the GBP/CAD exchange rate failed to particularly strengthen. While Prime Minister David Cameron was speculated to be close to a deal on in-work EU migrant benefits, one of the major demands of his negotiation with the European Commission, subsequent denials saw ‘Brexit’ concerns weigh the Pound down further.
Today has seen Brent crude remain well above the $30 mark in spite of there being no substantial signs of the global supply glut easing, with this sustained recovery in oil prices bolstering the commodity-correlated Canadian Dollar. Also lending support to the ‘Loonie’ was the November Canadian GDP, which rose 0.2% on the year as expected. This lack of disappointment, alongside an unexpectedly improved Industrial Product Price figure, prompted the GBP/CAD pairing to slump sharply to a two-month low of 1.9871.
GBP/CAD Exchange Rate Forecast: ‘Brexit’ Fears Predicted to Push Pound Lower
Monday’s Manufacturing PMIs are likely to provoke fresh volatility for the GBP/CAD currency pair, as manufacturing output both in the UK and Canada is forecast to have declined somewhat in January. As Cameron’s negotiations with the European Commission are expected to run through the weekend there could be a fresh surge in ‘Brexit’ worries at the start of the new week, as a greater delay to the referendum would seem to ensure that the BoE will feel compelled to hold off on an interest rate hike for longer.
Current GBP, CAD Exchange Rates
At the time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was slumped around 1.9927, while the Canadian Dollar to Pound Sterling (CAD/GBP) pairing was making gains in the region of 0.5013.