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Mixed Oil Prices as Storms Hit Production Sends the Pound Canadian Dollar (GBP/CAD) Exchange Rate Higher

August 25, 2020 - Written by John Cameron

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Edges Higher as Tropical Storms Hit Oil Production

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate edged 0.3% higher, leaving the pairing trading at around C$1.7342.

The Canadian Dollar slipped as crude oil prices were left mixed after traders weighed up rising coronavirus cases in Europe and Asia against huge production cuts in the US Gulf Coast due to Tropical Storms Laura and Marco.

According to Stephen Innes, chief global markets strategist at AxiCorp:

‘A jump last week in the US rig count and mixed data on COVID-19 infections are having a muted negative effect on oil this week, thanks in part to the possible disruption from two separate hurricanes moving into the US Gulf Coast region.’

Energy companies cut production at US Gulf Coast oil refineries on Monday following a shutdown of 82% of the area’s offshore crude oil output.

This has led to cuts of more than 1.5 million barrels per day, which is around 14% of the country’s total output.

While this offered some support for oil prices, traders continued to focus on the coronavirus crisis.

Monday saw a top US infectious diseases expert warn that rushing out vaccines could undermine other promising trials. This followed the boost at the start of the week after US regulators gave the greenlight to the use of blood plasma from recovered coronavirus patients as a treatment option for the virus.

Pound (GBP) Rises despite British Retailers Slashing Jobs by Largest Amount in a Decade

Meanwhile, Sterling was able to rise against the Canadian Dollar despite data showing that British retailers slashed jobs by the largest amount since 2009.

The Confederation of British Industry also said it expects the pace of job losses to accelerate more in the coming months.

The quarterly figures show the employment balance tumbled to -45 in August, from May’s -20. This was the lowest level since February 2009.

The CBI’s monthly retail sales balance also slumped to -6 unexpectedly in August from a 15-month high just a month before.

The dire tone of this morning’s data contrasts with the majority of indicators, including the official figures which showed retail sales jumped back above pre-coronavirus pandemic levels last month.

Commenting on this morning’s data, CBI economist Alpesh Paleja said:

‘Trading conditions for the retail sector remain tough, even against the backdrop of business slowly returning. Firms will be wary of deteriorating household incomes and the risk of further local lockdowns potentially hitting them in the pocket for a second time.’

Pound Canadian Dollar Outlook: BoC and BoE Speeches in Focus

Looking ahead, the Canadian Dollar (CAD) could slide further against the Pound (GBP) following several Bank of Canada (BoC) speeches this week.

If BoC policymakers are overly cautious it is likely to weigh on the ‘Loonie’ and send the currency lower.

Meanwhile, Sterling could give up today’s gains as GBP traders await the latest Bank of England (BoE) speeches.

Markets will be looking for any hints of negative interest rates, which would weigh on the British currency. According to Francesco Pesole, FX strategist at ING:

‘We suspect they may continue to sort of keep the threat on that they will cut again, without actually cutting rates.’

Any hints of the central bank sending rates into negative territory will send the Pound Canadian Dollar (GBP/CAD) exchange rate lower.

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