GBP CAD Exchange Rate Forecast Lower, GBP EUR Higher

Modified: Wednesday, 4 February 2015 10:31 BST - Written by John Cameron

STORY LINK GBP CAD Exchange Rate Forecast Lower, GBP EUR Higher

In a day which saw conventional wisdom turned on its head, the Canadian Dollar (currency:CAD) and the euro (currency:EUR), two of the market’s perennial underperformers during recent times, got the better of almost all of the other sixteen most actively traded global currencies. Our leading analyst explores the reason for this development and makes his forecast for the future performance of both CAD and EUR below.

The reason behind the sharp plunge in the Pound Sterling Canadian Dollar GBP CAD exchange rate over the past 24hrs has been clear – take a look at the wholesale oil price for clues. The price of a barrel of Brent Crude was languishing just above the $48 level during the first half of last week, but subsequent sessions have seen a strong move forward for ‘Black Gold’. Yesterday’s session saw Brent climb by almost 3.0%, while Monday’s session saw an even greater intraday gain. The climb in oil prices was largely fuelled by Monday’s data which showed that American oil firms has severely cut back on their applications for exploration licences. The news was taken by oil analysts as a sign that producers were set to constrict global output – a move which, by the laws of supply and demand, will send the price of a barrel higher.

The Canadian Dollar was hit hard by last week’s surprise announcement by the Bank of Canada that it was cutting its key interest rate – a move which sent GBP CAD up to 1.9276, its highest level since July 2009 when the world economy was still in the grip of a fully-blown financial crisis. With GBP CAD dropping to a near-term low of 1.8822 late yesterday, most commentators now forecast that oil will go up and GBP CAD will track lower into the medium term.

Elsewhere, investors showed that they are willing to set concerns regarding Greece’s demands for a bailout write-off to one side yesterday in order to focus on the European Central Bank’s €1.14tn Quantitative Easing programme which is set to commence next month. The GBP EUR exchange rate slumped to its lowest level since 22nd January, but the consensus forecast amongst analysts is that the gains for the single currency are likely to prove short-lived.

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TAGS: Canadian Dollar Forecasts Currency Predictions Euro Forecasts Euro Forecasts