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Falling Oil Prices Sends the Pound Canadian Dollar (GBP/CAD) Exchange Rate Higher

March 23, 2020 - Written by John Cameron

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as Oil Prices Continue to Slump

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rose by around 0.6%, leaving the pairing trading at around CA$1.6766.

The oil-sensitive ‘Loonie’ slumped today as Brent crude prices extended its slump amid further action from governments to contain the coronavirus outbreak.

The pandemic has cut demand for oil and threatened a global economic contraction which dampened market sentiment.

Oil prices have now taken a battering for four straight weeks, and have fallen by around 60% since the start of 2020.

Covid-19 has now killed over 14,000 people worldwide, disrupting business, travel and day-to-day life. And many oil companies have rushed to cut spending and put employees on furlough.

Commenting on oil prices, Edward Moya, senior market analyst at OANDA said:

‘Even if oil prices somehow manage to rebound a little more, oil is heading south as the demand destruction for crude will only get worst as more countries intensify their shutting down of non-essential business efforts and as storage space for crude runs out.’

Sterling (GBP) Edges Up despite Coronavirus Panic

The Pound was able to edge higher against a weaker Canadian Dollar despite heading back towards earlier 35-year lows against the US Dollar (USD).

GBP fell against the USD as investors headed back towards the safe-haven currency as investors continued to remain wary about the economic impacts of the virus.

A fresh wave of coronavirus worries hit the Pound as investors became wary of the UK government’s approach to dealing with Covid-19.

The country has seen a more staggered approach to measures enforced by the government.

However, some analysts have praised the country’s response, as the Bank of England (BoE) offered GBP some support last week after a second emergency rate cut.

The BoE cut rates to a record low and ramped up its quantitative easing measures, and Chancellor Rishi Sunak announced significant fiscal stimulus.

In a research note, ING analysts said:

‘The broken financial environment means that GBP is not able to respond to the proactive fiscal support undertaken by UK policy makers.’

Pound Canadian Dollar Outlook: Oil Prices and UK Flash PMIs in Focus

Looking ahead to Tuesday, UK flash PMI data is likely to cause the Pound (GBP) to edge lower against the Canadian Dollar (CAD).

If both the UK’s manufacturing and closely-watched services sectors slide into contraction, Sterling sentiment will be left dampened.

Meanwhile, a lack of Canadian economic statistics means it is likely the coronavirus and oil prices will remain in focus for CAD investors.

If oil prices continue to slump, it is likely this will offset weak UK PMI data and cause the Pound Canadian Dollar (GBP/CAD) exchange rate to extend today’s gains.

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