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Pound Canadian Dollar (GBP/CAD) Exchange Rate Benefits as Oil Prices Resume Slide

December 27, 2018 - Written by Frank Davies

Oil Worries Boost Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate

Weak oil prices helped to keep the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate on a stronger footing on Thursday.

After seeing a rebound on Boxing Day oil prices came under renewed pressure, with Brent crude slipping below US$54 per barrel once again.

Lingering market worries over the prospect of a global oversupply glut left oil prices on a downtrend as signs continue to point towards the global economy losing further momentum in 2019.

This weighed heavily on the commodity-correlated Canadian Dollar, especially as recent signs from the Canadian economy have proved rather mixed in nature.

While confidence in the Pound remained somewhat muted in the face of sustained political uncertainty this was not enough to prevent the GBP/CAD exchange rate pushing higher over the course of the day.

Pressure Mounts on CAD Exchange Rates as Small Business Optimism Declines

December’s CFIB business barometer put further pressure on CAD exchange rates as the index dipped from 61.2 to 53.6 on the month.

Sentiment among small businesses slipped to its lowest level since March 2016, giving investors fresh incentive to sell out of the Canadian Dollar.

The report also indicated that firms are dialling back their hiring intentions for the months ahead, something which is likely to feed through into the unemployment rate and the health of the wider economy.

This gave the GBP/CAD exchange rate an additional boost as the odds of the Bank of Canada (BOC) raising interest rates again in the near future continued to diminish.

Lower UK Mortgage Approvals to Dent GBP/CAD Exchange Rate

However, demand for the Pound could diminish ahead of the weekend if November’s BBA mortgage approvals data eases as forecast.

Any evidence of a weaker housing market and more limited lending would further undermine confidence in the outlook of the UK economy.

However, a resilient mortgage approvals figure could give the GBP/CAD exchange rate an additional boost if signs point towards a greater level of domestic confidence.

Even though a sense of political uncertainty looks set to dominate the outlook of the Pound in the weeks to come any upside surprises in UK data may limit any downside pressure.

Political developments could see the Pound trending lower, however, as Theresa May’s Brexit proposal still looks set to be shot down in a parliamentary vote.

Pound Sterling (GBP) Exchange Rates Vulnerable to Weaker UK Manufacturing PMI

Monday’s UK manufacturing PMI is likely to provoke additional volatility for the GBP/CAD exchange rate.

Another month of weaker growth within the UK manufacturing sector could weigh heavily on the Pound, indicating that the fourth quarter ended on a sour note.

If the UK economy looks set to lose further momentum in the final month of 2018 investors are likely to pile out of the Pound.

On the other hand, evidence of resilient growth would give the GBP/CAD exchange rate a fresh rallying point.

While uncertainty continues to cloud the outlook of the UK economy a solid performance from the December PMIs may encourage a greater sense of optimism in the short term.
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