Pound to Canadian Dollar: GBP/CAD Exchange Rate Higher as Oil Dips

February 23, 2015 - Written by David Woodsmith

STORY LINK Pound to Canadian Dollar: GBP/CAD Exchange Rate Higher as Oil Dips

The Pound made gains against the Canadian Dollar as last week’s poor Canadian retail sales data continued to weigh and as oil prices fell on concerns over global oversupply.

According to Statistics Canada, retail sales in the North American nation fell sharply by 2%, the biggest decline recorded since April 2010.

Economists had been forecasting for a drop in sales of just 0.4%. The main cause for the poor data was falling oil prices as sales at petrol stations tumbled by 7.4%.

On Monday, The Pound to Canadian Dollar exchange rate was 0.76 pct higher compared to the day's open at 1.94352. The US Dollar to Canadian Dollar (USD/CAD) exchange rate is also 0.33 pct higher at 1.25764.

The data raised expectations that consumer confidence in Canada is beginning to be negatively impacted by the sharp plunge in crude oil prices in the second half of 2014. As Canada is a major exporter of crude oil, the nation’s economy has been heavily impacted by the declines in the oil price. The Bank of Canada cut interest rates last month in a surprise move it called an insurance policy against the oil price shock.

Oil Sends CAD Dollar Lower vs the Pound Sterling

Oil prices fell again at the start of the week as concerns over oversupply in North America weighed. Prices of the commodity inched higher early in the session on optimism that the crisis in Greece and the Eurozone had been averted, that optimism was misplaced however as both sides still need to agree to proposed reforms by Greece.

According to Goldman Sachs, US oil production is expected to climb to 440,000 barrels per day by the final quarter of this year.

Concerns over the state of the Canadian economy are growing as investor sentiment in the nation’s banks is beginning to deteriorate and jitters are growing about their prospects in a weakening economy.
The ‘Loonie’ was also under some pressure on concerns over terrorism. A video posted online by the Islamist al-Shabab group encouraged a terrorist atrocity to be carried out in shopping centres in a number of Western nations including Canada.

‘The Canadian banking sector is under pressure due to tight net interest margins and slowing loan growth. When you look at the amount of leverage banks have on their balance sheets, they are a bit at risk right now,’ said the director of capital markets and strategy at Manulife Asset Management.

The only major market-moving piece of economic data out of Canada will be Thursday’s Inflation data. With oil prices still low, we can expect inflation to remain weak. On a monthly basis, inflation is likely to have seen some improvement.

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