Pound to Canadian Dollar Exchange Rate Slips Ahead of Anticipated Canadian Debate on Coronavirus Aid
Updated 16:21 GMT 23/03/2020:
The Pound (GBP) was largely unappealing today as the optimism over last week’s UK stimulus ran low.
Meanwhile, hopes for Canada’s stimulus to be ramped up, combined with the latest Federal Reserve stimulus, boosted market sentiment and helped the Canadian Dollar (CAD) to hold its ground today.
Assets correlated to risk, such as oil prices and CAD itself, found some fresh support in the brief calm the latest Fed news instilled into markets.
Canadian Dollar investors are currently hesitant to sell the currency too much either, amid anticipation for tomorrow’s Canadian parliamentary debate and vote on coronavirus aid.
(Originally published 12:14 GMT 23/03/2020)
Pound to Canadian Dollar Exchange Rate Struggles to Advance despite CAD Weakness
Despite the ongoing oil price war putting pressure on the Canadian Dollar (CAD), the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has tumbled in recent weeks. Today’s movement is limited, with both the Pound (GBP) and Canadian Dollar unappealing.
Deepening concerns over how the coronavirus will hurt Britain’s economy is keeping GBP/CAD lower. After opening last week at the level of 1.6965, GBP/CAD briefly edged higher before sliding.
GBP/CAD briefly dipped to a low of 1.6584 towards the end of the week. This was the worst level for the pair in over five months, since October 2019.
Ultimately, GBP/CAD shed around two cents last week and closed the week around the level of 1.6753.
This week so far, GBP/CAD has fluctuated amid weakness in both currencies. At the time of writing, the pair continued to trend near the week’s opening levels. Concerns over the coronavirus pandemic are dominating both currency outlooks.
Pound (GBP) Exchange Rates Struggling to Benefit from Stimulus amid Financial Concerns
Last week, the UK government became the latest major government to ramp up its response to the coronavirus pandemic.
With the number of cases in Britain now rising quickly, the government began to toughen its stance and ramp up support for businesses.
The UK Treasury announced a big stimulus package for many workers and the Bank of England (BoE) introducing impressive monetary policy easing. This briefly helped the cheap Pound to rebound last week.
However, investors remain concerned about the number of domestic businesses closing as a result of the pandemic. On top of this, Britain’s current account deficit is worsening market concerns about Britain’s ability to handle the crisis.
According to Analysts at ING:
‘The broken financial environment means that GBP is not able to respond to the proactive fiscal support undertaken by UK policy makers,’
Canadian Dollar (CAD) Exchange Rate Appeal Limited by Oil Price War
Much like the Pound, the Canadian Dollar’s outlook has been throttled by the coronavirus pandemic.
The Canadian Dollar, however, has been hit especially hard due to Covid-19’s impact on the oil industry. Oil is Canada’s biggest export, so the plummeting oil price in recent months has been a huge downside factor in CAD movement.
With oil prices plunging on the pandemic and oil producers unable to reach an agreement to stimulate demand, an oil price war has also broken out. This is causing oil prices and CAD to see even deeper weakness.
These factors are limiting Canadian Dollar demand. Despite this though, the Canadian Dollar has been able to advance against Sterling.
Coordinated stimulus efforts from the Bank of Canada and Canada’s government have impressed markets. With the government also pledging to help Canada’s oil industry, the Canadian Dollar has been able to avoid deeper weakness.
Government Action and Oil to Influence Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook
Pound investors are currently anticipating more action from the UK government and Treasury to tackle the coronavirus pandemic.
In particular, Chancellor Rishi Sunak is under pressure to boost government support for the unemployed soon.
If markets are impressed with the government’s fiscal policy measures, the Pound could see stronger support. This would make it easier for GBP/CAD to recover.
However, if Canada’s government also ramps up fiscal stimulus, Canadian Dollar demand could rise. On the other hand, a worsening oil price situation is likely to keep the Canadian Dollar under pressure.
On top of coronavirus and oil price news, Thursday’s Bank of England (BoE) policy decision could also influence the Pound to Canadian Dollar (GBP/CAD) exchange rate outlook.