Hopes for Increased Oil Demand Sends the Pound Canadian Dollar (GBP/CAD) Exchange Rate Lower

April 29, 2020 - Written by John Cameron

STORY LINK Hopes for Increased Oil Demand Sends the Pound Canadian Dollar (GBP/CAD) Exchange Rate Lower

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls as Oil Prices Edge Higher

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped by -0.6% today, leaving the pairing trading at around CA$1.7285.

The oil-sensitive ‘Loonie’ made gains against the Pound today after oil prices gained on Wednesday after US oil stockpiles increased less than expected.

Prices also rose on hopes demand from some European countries and US cities would increase after moves to ease the coronavirus lockdowns.

US crude inventories rose by 10 million barrels, below the 10.6 million barrels estimated by analysts.

Commenting on this, JCB Energy noted:

‘In part thanks to better than expected, or more accurately not as bad as feared, looking US inventory data, WTI prices have managed to make up lost ground.

‘Aside from a Cushing build that was hardly extravagant, API inventory data reportedly also hinted at the first gasoline stock draw in several weeks, a signal which optimistic market observers tend to like.’

Prices were also buoyed as risk appetite improved after France and Spain followed Italy’s lead in announcing plans to re-open the economy after easing the coronavirus lockdowns.

Lachlan Shaw, head of commodity research at National Australia Bank in Melbourne said:

‘The other thing coming through is more detail and a louder groundswell towards plans for removing COVID restrictions, particularly in Europe — in countries like Spain, France, Austria and Switzerland. That’s going to see demand pick up.’

Risk Appetite Rises Ahead of Fed Meeting

Wednesday saw a rise in risk appetite ahead of this evening’s US Federal Reserve’s monetary policy meeting. Traders moved away from the safe-haven US Dollar and towards higher yielding currencies.

Commodity-linked currencies were also boosted, which saw the ‘Loonie’ rise against the Pound, and commenting on this, Charalambos Pissouros, a senior market analyst at JFD Group said:

‘The weakening of the Dollar and the strengthening of the commodity-linked currencies suggest that risk appetite may have remained supported for another day.

‘The optimism due to several economies starting to loosen restrictive measures may have also helped.’

Sterling (GBP) Slides as UK-EU Trade Tensions Remain

Meanwhile, the Pound edged lower against the Canadian Dollar following Tuesday’s reports about the UK-EU trade negotiations.

Reports noted that talks between Britain and the European Union were stuck at a standstill, dampening Sterling sentiment.

Officials and diplomats in Brussels noted talks about post-Brexit trade agreements are at an impasse due to disagreements over the coronavirus pandemic.

An anonymous EU diplomat said:

‘We are at an impasse. There are plenty of minor technical details where we could find solutions. But on the fundamental goals each side is trying to achieve - the differences are enormous. Things cannot move without a political push. And it’s missing.’

Pound Canadian Dollar Outlook: Will Today’s Fed Meeting Boost Risk Appetite?

Looking ahead, the Canadian Dollar (CAD) is likely to edge higher against the Pound (GBP) following the Federal Reserve’s monetary policy meeting.

If the tonight’s meeting boosts risk appetite, it will send the ‘Loonie’ higher.

Meanwhile, on Thursday Canada’s GDP data will remain in focus for Canadian Dollar traders.

If the country’s GFD remains near stagnation in February, before the coronavirus crisis hits, the ‘Loonie’ will be left under pressure. This would cause the Pound Canadian Dollar (GBP/CAD) exchange rate to edge higher, clawing back some of today’s losses.

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TAGS: Pound Canadian Dollar Forecasts