June 12, 2020 - Written by John Cameron
STORY LINK Pound to Canadian Dollar (GBP/CAD) Exchange Rate Falls as Oil Prices Show Recovery
GBP/CAD Exchange Rate Sinks as ‘Loonie’ Benefits from Rising Oil Prices
The Pound to Canadian Dollar (GBP/CAD) exchange rate is currently trading around CA$1.70, with the pairing down by -0.5% on today’s opening rate.
The Canadian Dollar (CAD) has benefited today after oil prices showed signs of recovery after their sharpest daily plunge in 6-weeks this week. However, with oil prices likely to close the week with a loss, we could see the ‘Loonie’s gains being short-lived.
Han Tan, market analyst at FXTM, commented in a research note:
‘Should the spike in Covid-19 cases in some US states gather momentum and derail the economic recovery, that could clear the path towards lower prices for crude.’
As a result, the oil sensitive ‘Loonie’ has begun to show some signs of recovery today. Canada’s economy is particularly reliant on its oil exports, so any signs of improvement in oil prices proves CAD-positive.
Today also saw the release of Canada’s capacity utilization report for the first quarter, which fell below forecasts from 81.4% to 79.8%. As a result, some ‘Loonie’ investors have become increasingly concerned for Canada’s economic recovery in the months ahead.
Pound (GBP) Falls as UK Growth Plummets in April
The Pound (GBP) fell today after the latest GDP report for April fell from -5.8% to a whopping -20.4% – its worst on record as the coronavirus crisis continues to drag on the British economy.
Jonathan Athow, deputy national statistician for economic statistics at the ONS, commented on the report:
‘April’s fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost 10 times larger than the steepest pre-Covid-19 fall.’
As a result, Sterling has suffered from growing concerns for the UK’s economy as data continues to point towards an unprecedented slump in the second quarter.
Today also saw the release of the UK’s industrial production report for April, which slumped by 20.3%. Consequently, this left many traders deeply concerned for the UK’s manufacturing and industrial sector going forward.
GBP/CAD Outlook: Could Downing Street Ease Lockdown Measures Next Week?
Canadian Dollar (CAD) investors will be looking ahead to Monday’s release of Canada’s manufacturing sales report for April. However, if this confirms figures and falls by -5.7%, we could see the ‘Loonie’ suffer.
Next week will see the Canadian Dollar remain sensitive to oil prices. Any signs that oil prices could fall would prove CAD-negative.
The GBP/CAD exchange rate is likely to remain subdued next week, however, with the UK’s unemployment rate for April forecast to increase.
However, if Downing Street shows any signs of easing the UK’s Covid-19 lockdown measures, we could see Sterling begin to rise.
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TAGS: Canadian Dollar Forecasts Pound Sterling Forecasts