Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rises as UK Chancellor Announces Support for Businesses

September 24, 2020 - Written by John Cameron

STORY LINK Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rises as UK Chancellor Announces Support for Businesses

GBP/CAD Exchange Rate Edges Higher as UK Government Promises to Cover 22% of Worker Pay for Six Months

The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.5% today, with the pairing currently trading around CA$1.711.

Sterling rose today after British Chancellor Rishi Sunak revealed that the Government would support wages and help firms secure jobs.

Sunak was also optimistic about early signs of progress, noting the increase in GDP and steadily improving retail sales.

Mike Cherry, national chairman of the Federation of Small Businesses, praised Sunak’s steps, saying:

‘There are many measures to welcome here that will make a real difference. It’s particularly encouraging to see that all small businesses will be able to access the new job support scheme without facing excessive paperwork, with a guarantee of help for the next six months.’

However, the Pound (GBP) has benefited from the Government’s promise to cover 22% of worker pay for the next six months. As a result, GBP investors have interpreted this as offering a degree of uncertainty as we head toward the winter months.

In other UK economic news, today saw the release of September’s CBI Distributive Trades Survey, which beat forecasts and rose by 11%.

Ben Jones, the CBI's principal economist, said:

‘The latest results suggest that the recovery in retail spending over the summer months has continued into September, which is welcome news, but retailers appear cautious over the near-term outlook.’

Canadian Dollar (CAD) Falls as Risk-Sentiment Drops on Global Economic Uncertainty

The risk-averse Canadian Dollar (CAD) failed to rise against Sterling today as concerns continue to grow over the global economy’s strength now the Covid-19 infection rate climbs worldwide.

Analysts at Reuters explain:

‘[CAD] weakened to a seven-week low against its U.S. counterpart on Thursday as investors worried about another global economic hit from the coronavirus pandemic and Ottawa’s pledge of further economic aid failed to lift the currency.’

Meanwhile, Canada is seeing its own pick-up in coronavirus infections. As a result, CAD traders are concern that this could further increase the nation’s burgeoning deficit.

Canadian Dollar (CAD) investors also continue to eye oil prices, which have steadily edged higher today, with WTI crude oil currently trading around $39.93.

However, any further market volatility could weaken the price of oil, dragging down the oil-reliant ‘Loonie’ as Canada’s most lucrative commodity slides in value.

GBP/CAD Outlook: Brexit and Covid-19 Uncertainty to Weigh On Sterling

The Canadian Dollar (CAD) will remain sensitive to global economic developments this week. If uncertainty continues to rise – and Covid-19 cases increase in Canada – then the ‘Loonie’ would suffer.

The Pound (GBP) will also remain sensitive to the UK’s domestic coronavirus crisis. Any indications that the Covid-19 infection rate is rising would spark fears of a second lockdown and prove GBP-negative.

The GBP/CAD exchange rate could tumble this week as the UK faces double uncertainty over Covid-19 and Brexit. As a result, Sterling will likely lose some of today’s gains as the week comes to a close.

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