GBP/CAD Exchange Rate Sinks as Oil Prices Drive Up the Canadian Dollar
The Pound to Canadian Dollar exchange rate fell by -0.6% today, with the pairing currently trading around CA$1.76.
The commodity-linked Canadian Dollar benefited from climbing oil prices today. This follows progress in the huge US stimulus bill of $1.9 trillion.
Stephen Innes, chief global markets strategist at Axi, explains:
‘Oil prices are recovering this morning in line with most risk assets on the back of the U.S. stimulus bill passing the House and as central banks continue to sabre rattle to ward off market-implied financial tightening.’
As a result, CAD investors are fast becoming more confident about the outlook for Canada’s economy, as oil is one of the nation’s largest exports.
In Canadian economic data, today saw the release of the latest Manufacturing PMI for February, which rose to 54.8.
‘Latest PMI data highlights another solid improvement in the overall health and resilience of Canada’s manufacturing sector. An improving domestic demand picture, greater purchasing activity and a sustained period of employment suggests firms expect greater output in the months ahead.
‘That said, COVID-19 continues to pose its threats with severe transportation bottlenecks impacting the supply of inputs. As a result, firms faced sharper cost pressures which were consequently passed on to customers.’
Pound (GBP) as Supply-Chain Volatility Weakens UK Manufacturing Sector
The Pound fell today as fears continued to rise over the discovery of the Brazilian variant of Covid-19 in the UK.
As a result, GBP investors are becoming more cautious about the UK economy, as a new outbreak could threaten the efficacy of the vaccine rollout and ramp up cases of Covid-19.
In UK economic news, today saw the release of the latest UK Manufacturing PMI for February, which beat forecasts and rose to 55.1.
However, investors are becoming concerned that supply-chain issues could be dampening the strength of the UK’s manufacturing sector.
Rob Dobson, Director at IHS Markit, explains:
‘The UK manufacturing sector was again hit by supply chain issues, COVID-19 restrictions, stalling exports, input shortages and rising cost pressures in February. Look past the headline PMI and the survey reveals near stagnant production, widespread shipping and port delays and confusion following the end of the Brexit transition period.’
Meanwhile, GBP traders are speculating ahead of Chancellor Rishi Sunak’s Spring Budget.
As a result, UK markets are remaining cautious as this could prove a decisive moment for the UK economy in the months ahead.
GBP/CAD Exchange Rate Outlook: Could Brazilian Covid-19 Variant Fears Drag Down the Pound?
Canadian Dollar traders will be awaiting tomorrow’s publication of the latest Canadian GDP data for the fourth quarter.
Any improvement in the outlook for Canada’s economy would be CAD-positive.
Oil prices will continue to drive the CAD/GBP exchange rate, however. As a result, we could see prices head higher on confidence that the US stimulus package could pass its next hurdle.
Pound traders will be eyeing the UK’s Covid-19 situation. If the Brazilian variant causes further complications, however, then the GBP/CAD exchange rate would suffer.