June 19, 2020 - Written by John Cameron
STORY LINK Pound to Canadian Dollar (GBP/CAD) Exchange Rate Sinks Despite Signs of Recovery for UK’s Retail Sector
GBP/CAD Exchange Rate Sinks as UK Public Borrowing Rockets in May
The Pound to Canadian Dollar (GBP/CAD) exchange rate fell by -0.6% today, with the pairing currently trading around CA$1.67.
Sterling suffered today despite signs of a recovery in the UK’s retail sector after May’s retail sales figures beat forecasts and rose from -18% to 12%.
However, Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, was gloomy, warning that the ‘overall consumer picture remains bleak’.
Mr Tombs also added:
‘May's recovery in retail sales should not be interpreted as a sign that the economy is embarking on a healthy V-shaped recovery from Covid-19.’
‘Naturally, spending on goods will recover faster than on services, which usually require human contact and remain largely unavailable.’
Meanwhile, the UK’s public spending figures shot to £55.2 billion, nine times higher than in May 2019.
Chancellor Rishi Sunak commented that the figures reflected the severe impact that Covid-19 has had on the British economy.
Mr Sunak said:
‘The best way to restore our public finances to a more sustainable footing is to safely reopen our economy so people can return to work.’
Canadian Dollar (CAD) Edges Higher as Oil Prices Rise
The Canadian Dollar (CAD) has continued to benefit from rising oil prices today, after oil rose above $42 per barrell on Friday. As a result, ‘Loonie’ investors are becoming more optimistic that Canada’s oil-reliant economy could be on the fast road to recovery.
This follows Iraq and Kazakhstan’s compliance at the OPEC+ meeting to improve oil cuts. Consequently, this has improved hopes that curbs could improve in coming months.
Paola Rodriguez Masiu, analyst at Rystad Energy, commented:
‘There is enthusiasm in the market that oil supply is still under control. A positive OPEC+ meeting does that, and yesterday’s session helped renew confidence.’
Some of the Canadian Dollar’s gains were held back by today’s release of the Canadian retail sales figures for April, which shot below forecasts from -9.9% to -26.4%.
Royce Mendes, senior economist at CIBC Capital Markets, commented:
‘Retailers were devastated by the shutdowns and physical distancing measures employed in April.’
‘It wasn’t all bad news in the report though. Retailers who had an online presence were able to capitalize on some of the shifts in buying patterns.’
GBP/CAD Outlook: Could a Positive UK Services PMI Buoy Sterling on Tuesday?
Canadian Dollar (CAD) investors will be looking ahead to Monday’s speech by the Bank of Canada’s Governor, Tiff Macklem. Any dovish comments about the Canadian economy would prove CAD-negative.
Pound (GBP) traders will be looking ahead to Tuesday’s flash release of the Markit Services PMI for June. However, if this improves this month could see Sterling rise as the UK’s largest sector recovers from the Covid-19 crisis.
Oil prices will continue to drive the ‘Loonie’ next week, so any signs of an uptick in the value of oil would boost the CAD/GBP exchange rate.
The GBP/CAD exchange rate could recover some of its losses next week if Downing Street announces any further easing to the nationwide coronavirus lockdown restrictions.
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