GBP/CAD Exchange Rate Sinks as BoE is Gloomy About British Economy’s Recovery
The Pound to Canadian Dollar (GBP/CAD) plummeted by -1% today, with the pairing currently trading around CA$1.68.
Sterling suffered today after the Bank of England (BoE) announced that it would extend its quantitative easing programme by £100 billion to help recover the British economy from the coronavirus crisis.
The Pound (GBP) suffered from the bad news that there is a huge appetite for borrowing, indicating that companies are struggling even after the leasing of the lockdown.
Analysts have also stated that the economy could only begin to recover in two or even three years, a prospect that is leaving many GBP investors skittish.
Andrew Bailey, the Governor of the BoE, did offer a glimmer of hope however, commenting:
‘As partial lifting of the [lockdown] measures takes place, we see signs of some activity returning.’
‘We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.’
Post-Brexit concerns are also weighing on the Pound today. This follows the European Parliament’s heated warning that it would not accept a watered-down deal with the UK.
Canadian Dollar (CAD) Rises as Oil Prices Edge Higher on Hopes of OPEC Meeting
The oil-sensitive Canadian Dollar (CAD) rose today despite mixed signals from US economic data. This gave bulls further ammunition ahead of the next OPEC meeting which could bolster options to renew output strategies.
PVM oil analysts commented:
‘Gasoline and distillates both fell unexpectedly… Add to that that oil producers are still feeling the impact of the rout from March and April as (U.S.) crude oil output is now down at 10.5 (million barrels per day) and you might conclude that bulls have a case in point.’
With Canada’s economy heavy reliant on oil exports, this has brought good news for the economy going forward. Any further signs that output strategies are in favour of Canadian oil would prove CAD-positive.
Louise Dickson, oil markets analyst at Rystad Energy, however warned:
‘The [OPEC] meeting of course can also go sideways. Members that are not fully complying with their production cut quota are always a sticky point for the big guns of the alliance.’
In Canadian economic news, today saw the release of the CADP employment change figure, which improved from -2361.7 thousand to 208.4 thousand. As a result, this buoyed hopes in Canada’s economic recovery in the months ahead.
GBP/CAD Forecast: Could Falling Oil Prices Weaken the Canadian Dollar?
Canadian Dollar (CAD) investors will be looking ahead to tomorrow’s release of Canada’s retail sales report for April. If this falls from -10% to -15.1% as expected, then we could see the ‘Loonie’ suffer.
Oil prices will also continue to drive the Canadian Dollar this week. However, any sudden fall could considerably weaken the CAD/GBP exchange rate
Sterling traders will be looking ahead to tomorrow’s release of the UK’s retail sales for May. If this confirm forecasts and rise last month, then we could see the GBP/CAD exchange rate begin to improve.