GBP to CAD Exchange Rate Slips from Best Levels as Oil Prices Rebound

June 26, 2020 - Written by James Fuller

STORY LINK GBP to CAD Exchange Rate Slips from Best Levels as Oil Prices Rebound

Weakness in the Canadian Dollar has made it easier for the British Pound to Canadian Dollar (GBP/CAD) exchange rate to climb this week. However, as the Canadian Dollar is seeing a slight improvement in performance before markets close for the week, the pair’s advances have slowed. The Pound lacks the drive to advance much itself, as coronavirus and Brexit uncertainties continue to weigh heavily on its outlook.

After opening this week at the level of 1.6802, GBP/CAD has spent the week trending higher. A brief dip to a quarterly low of 1.6757 was quickly followed by a rebound as the Canadian Dollar tumbled across the board.

In the middle of the week, GBP/CAD touched on a weekly high of 1.6999. GBP/CAD was unable to hold this best level though, and since then has been sliding slowly from highs.

The Canadian Dollar is rebounding slightly due to hopes in oil markets. At the time of writing on Friday, GBP/CAD is trending in the region of 1.6918.

GBP Exchange Rates Kept Under Pressure by Brexit Uncertainty

Investors have remained hesitant to buy the Pound this week. This has heavily limited its potential for gains against a broadly weaker Canadian Dollar.

Various issues continue to weigh heavily on the Pound’s overall outlook. The UK government’s handling of the coronavirus has caused concern that Britain’s economy will see more long-term damage from the pandemic.

On top of this, markets and businesses are becoming increasingly anxious that 2020 could end with a no-deal outcome for the Brexit process.

UK-EU Brexit negotiations are ongoing, but there has been little notable progress for the past few months. Despite this, Britain continues to insist it will not extend the Brexit transition period.

According to Analysts at ING, Pound investors have little reason to buy the British currency amid expectation of more Brexit talks:

‘The UK is also having to deal with the threat of US tariffs, along with fears of an upcoming second wave of Covid-19 flare-ups, as restrictions are eased.

For GBP, however, a wait-and-see approach may prevail ahead of next week’s Brexit talks, still the key driver of the currency.’

CAD Exchange Rates Rebound from Worst Levels as Oil Prices Find Strength

The Canadian Dollar has been one of the worst-performing major currencies this week overall. However, a late-week boost in oil prices is helping the currency to bounce back a little from its worst levels.

Oil is Canada’s biggest export. As a result, news of an uptick in demand helped the commodity to rise after days of losses, and this supported the Canadian Dollar as well.

However, the Canadian Dollar remains low this week overall. The Canadian Dollar has been hit harder than other risk-correlated currencies, due to its close correlation with trade sentiment.

Not only did oil spend much of the week tumbling lower on ‘second wave’ coronavirus fears, but US trade tensions have been reviving. Fears of a potential US-Europe trade war worsened this week.

On top of this, Canada’s economic outlook was hit by news that credit rating agency Fitch had downgraded Canada’s credit rating.

The credit rating was cut to AA+ from the coveted rating of AAA. It came due to Canada’s debts rising as the nation tackles the coronavirus pandemic.

According to Colin Cieszynski at SIA Wealth Management, other countries may follow in having credit ratings chopped though. He said:

‘Investors are not seeing this as an isolated event, but perhaps the first in a series of downgrades across many countries as a result of recent emergency spending’

GBP/CAD Exchange Rate Forecast: Growth Reports Ahead

Next week will see the publication of many key ecostats.

UK and Canadian growth results will be published. Britain’s final Q1 growth results will come in on Tuesday, with Canadian growth from April following in the afternoon.

Then, later in the week, UK consumer confidence and PMIs for June will be published. Canada’s trade balance and PMI data will be published as well.

If Canadian data beats forecasts, investors may become more optimistic about Canada’s economy weathering the coronavirus pandemic.

On the other hand though, if trade jitters persist and oil prices fall again, the Canadian Dollar could remain weak instead.

Demand for Sterling remains weak as well, so its potential for gains may be limited.

If upcoming Brexit news impresses investors, the British Pound to Canadian Dollar exchange rate is more likely to hold the past week’s gains.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Canadian Dollar Forecasts