GBP to CAD Exchange Rate Advances as Fresh Oil Concerns Emerge

February 9, 2017 - Written by Ben Hughes

STORY LINK GBP to CAD Exchange Rate Advances as Fresh Oil Concerns Emerge

The British Pound to Canadian Dollar exchange rate plunged on Friday afternoon. While the day’s UK data was impressive, the day’s strong Canadian employment report came as a real surprise to traders.

Not only did Canada avoid losing -5k jobs in January, it made 48.3k new jobs. The participation rate increased from 65.8% to 65.9% and despite this the unemployment rate still unexpectedly improved from 6.9% to 6.8% - making it a bumper result for Canadian employment and the Canadian Dollar.

[Previously Updated 10/02/2017]

The Pound struggled to find particular momentum during Friday’s European session in spite of positive domestic data, with hard Brexit worries still weighing on its outlook.

If the afternoon’s Canadian labour market data proves discouraging, however, the GBP/CAD exchange rate could see a stronger uptrend in the face of fresh ‘Loonie’ weakness.

[Previously updated 09/02/2017)

The Pound to Canadian Dollar exchange rate advanced again on Thursday. Lasting hopes for a more hawkish Bank of England (BoE) as well as gloomy forecasts for the oil market have left Sterling stronger and the Canadian Dollar weaker.

GBP/CAD began the week at the level of 1.6262 and has since gained over two cents in value. The pair hit a fresh weekly high of 1.6509 on Thursday morning.

GBP Sturdy on BoE Hopes and Solid House Prices

After a relatively flat Wednesday, the Pound advanced again on Thursday due to lasting sentiment about the hawkish comments made by Bank of England (BoE) policymaker Kristin Forbes.

Forbes stated earlier in the week that she would be willing to support a BoE interest rate hike in the foreseeable future if the economy remains solid and inflation continues rising.

Sterling has also benefited on Thursday by news that RICS’ January house prices report had come in above expectations, at 25%.

Lastly, notable weakness in many of the Pound’s key rivals, such as the Canadian Dollar but also the Euro and US Dollar have left the Pound the winner of the pack.

Demand for the Canadian Dollar has been generally poor this week due to growing concerns that prices of oil, Canada’s most lucrative commodity, will not improve in the mid to long-term as much as investors hoped.

While prices of the commodity edged up on Thursday morning due to a slip in US gasoline inventories, crude oil supplies spiked and increased concerns that US oil production was also increasing.

Brent crude trended at US$55.72 per barrel while WTI crude oil traded near US$52.70.

Concerns are also rising that oil prices will never again reach the highs seen before the 2014 price crash. As a result, markets are limp on oil and the ‘Loonie’ this week.

GBP/CAD Forecast: Canada’s January Employment Report Ahead

The Canadian Dollar’s movement could improve at the end of the week if January’s Canadian employment results impress traders.

The nation’s unemployment rate is predicted to remain at 6.9% and the participation rate at 65.8%. Analysts also expect employment to shrink by around -5k.

If employment actually improves despite the gloomy forecasts, the Canadian Dollar is likely to strengthen. However, unless the Pound’s recent sturdiness fades it may be unlikely for the Pound to Canadian Dollar exchange rate to fall back to the week’s opening levels by the end of the week.

Friday will also see the publication of Britain’s December trade balance results. The deficit is predicted to lighten slightly to -£3.5b. UK industrial and manufacturing production figures will also be published on Friday.

As always, movement in the oil markets will also influence the oil-correlated Canadian Dollar.

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