GBP CAD Exchange Rate Surges as Oil Prices Collapse

June 8, 2017 - Written by John Cameron

STORY LINK GBP CAD Exchange Rate Surges as Oil Prices Collapse

The Pound Canadian Dollar (GBP CAD) exchange rate rocketed up nearly two cents yesterday, reaching a two week high following a rout in oil prices.

Crude benchmarks nosedived on Wednesday, falling by up to 5% to a new monthly low following an unexpected rise in US stockpiles, dragging on the Loonie due to the Canadian economy’s reliance on oil exports.

US Shale inventories surprised markets yesterday as data showed that the US added 3.3m barrels of oil to national stocks last week, this was up from a decline of 6.4m barrels the week before and was far higher than the 3.4m barrel decline that analysts had predicted.

The sudden rise comes shortly after the Organization of the Petroleum Exporting Countries (OPEC) came to an agreement to extend production cuts amongst members into 2018.

The cartel is seeking to prop up oil prices by reducing the global surplus, however analysts were underwhelmed by the recent agreement as they suggested that the cuts would need to be deeper to have any notable impact, something that would be exacerbated if US shale stocks continue to rise.

Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics said;

‘These figures spell a setback to the joint effort by OPEC and some non-OPEC countries to curb their output as without persistent drawdowns in U.S. oil stockpiles, the process could be painfully slow.’

Meanwhile the Pound was weakened this morning following the release of the Eurozone’s latest GDP report which showed that the UK was the slowest growing economy in the European Union at the start of the year, registering only 0.2% growth in the first quarter.

This puts the UK behind even Greece, which continues to struggle under its enormous debt ceiling and with unemployment running at over 20%.

The downturn in the UK’s economy has been largely attributed to a slowdown in consumer spending, with activity in Britain’s all-important services sector slowing as households come under pressure from rapidly rising inflation and weak wage growth.

Looking ahead the GBP CAD exchange rate will be driven by the outcome of the UK general election tomorrow, with the Pound likely to strengthen if markets wake up to find that the Conservatives have gained a great majority in the House of Commons as recent polls suggest.

However should the Tories find their majority diminished or the election results in a hung parliament that Sterling is likely to tumble as investors fear it will weaken the government ahead of the upcoming Brexit negotiations.

Meanwhile the Canadian Dollar may soften tomorrow if domestic employment figures shows that the jobless rate rose from 6.5% to 6.6% in May as economists predict.

Current Interbank Exchange Rates

At the time of writing the GBP CAD exchange rate was trending around 1.7479 and the CAD GBP exchange rate was trending around 0.5714.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Canadian Dollar Forecasts