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Volatility Still Dominates Pound to Canadian Dollar Exchange Rate Outlook

Canadian Dollar Currency Forecast

Pound to Canadian Dollar Exchange Rate Struggles to Hold Best Levels 

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has seen mixed movement this week. Both the Pound (GBP) and the Canadian Dollar (CAD) briefly benefitted from movement at the end of the first quarter, but both outlooks remain pressured. 

The Canadian Dollar remained highly unappealing last week, making it easier for a resurgent Pound to recover. GBP/CAD gained a huge 7 cents last week and closed the week at the level of 1.7433.

GBP/CAD continues to trend with an upside bias this week, but some recovery in CAD demand is limiting the pair’s potential for gains. The pair touched on a 3-week-high of 1.7996 yesterday, but quickly slipped back to the week’s opening levels again. 

At the time of writing on Wednesday, GBP/CAD is trending near the level of 1.7625. The pair is once again over a cent above the week’s opening levels. 

Pound (GBP) Exchange Rates Struggle to Hold Best Levels amid Gloomy Outlook 

Last week’s strong Pound rebound was caused largely by stimulus policy from the Federal Reserve and US government. The actions boosted market liquidity and the Pound clawed back impressive ground as a result. 

However, Sterling’s appeal this week so far has been more due to quarter-end market positioning. 

It’s common for markets to close and adjust positions on key assets before the end of a quarter. This news led to another brief jump in Pound demand. 

The news also boosted CAD demand though. This, as well as GBP’s appeal being softened by dire UK data and recession concerns in the domestic outlook, meant that the currency has been unable to hold its best levels. 

According to Viraj Patel, FX and Global Macro Strategist at Arkera: 

‘The bleak economic reality becoming clear in the data – as well as a prolonged shutdown in economies – will likely trigger another wave of global asset selling and corporate defaults.’ 

Canadian Dollar (CAD) Exchange Rate Strength Limited by Oil Price Crisis Outlook 

The Canadian Dollar (CAD) benefitted from yesterday’s quarter-end position movement alongside the Pound. This was part of the reason GBP/CAD struggled to sustain yesterday’s gains. 

Oil prices being throttled by the coronavirus pandemic have meant the oil-correlated Canadian Dollar has been hit very hard by the virus as well. 

At the end of the quarter, some investors adjusted positions on the ‘Loonie’ and returned to the currency. According to Michael Goshko, Corporate Risk Manager at Western Union Business Solutions: 

‘We’ve got big month-end and quarter-end flows going through thin markets in the midst of a crisis,’ 

However, the Canadian Dollar has struggled to hold much of a recovery. There is no sign that oil prices are improving amid the coronavirus pandemic and the oil price war that has erupted in the middle of it. 

This is keeping CAD demand weak and making it easier for GBP/CAD to trend near its best levels. 

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook Awaits Economic Signals 

With both the Pound and Canadian Dollar being boosted and weakened by similar factors, volatility is expected in the GBP/CAD exchange rate. 

The Pound to Canadian Dollar exchange rate may not see a significant shift in movement without major news. This could mean GBP/CAD is able to more easily remain near its best levels in weeks. 

Sterling is more likely to benefit from brief rises in risk-sentiment than the Canadian Dollar. This is because of oil prices dominating the CAD outlook. 

However, any sign of meaningful improvement in oil markets could lead to a huge rebound in Canadian Dollar demand.  

Other economic signals could also influence the GBP/CAD outlook. UK and Canadian PMIs for March will be published through the end of the week and will give investors a better idea of how economic activity was hit by the coronavirus so far. 

The Pound to Canadian Dollar (GBP/CAD) exchange rate may struggle to see much sustained movement in the coming sessions without a notable change in market sentiment.