Pound to Can Dollar Outlook: GBP/CAD Exchange Rate Rises on Growing Confidence in the UK Economy

February 18, 2021 - Written by John Cameron

STORY LINK Pound to Can Dollar Outlook: GBP/CAD Exchange Rate Rises on Growing Confidence in the UK Economy

GBP/CAD Exchange Rate Heads Higher as UK Covid-19 Cases Continue to Fall

The Pound to Canadian Dollar exchange rate rose by 0.4% today following news that Covid-19 infections in England had dropped by two-thirds in a month. The pairing is currently fluctuating around CA$1.76.

This follows comments from Downing Street of a cautious but ‘irreversible’ easing of lockdowns in the next few months, a statement which has also been supported by Chancellor Rishi Sunak.

According to one ally of Sunak, he is always been ‘pro-reopening as quickly and as safely as possible, the ally also said:

‘We didn’t have a potentially permanent route out previously. So there is now hope that this will be the last lockdown and therefore everyone across government is taking more cautious approach.’

As a result, this has buoyed confidence in the UK economy, with investors now hopeful that the UK could begin easing lockdown measures in the months ahead.

Today also saw the news that UK business optimism had risen to a five-year high, according to a business confidence index compiled by the accountancy body ICAEW.

Michael Izza, the ICAEW’s chief executive, said:

‘Rising confidence among businesses is an encouraging sign of things to come and a predicted growth in employment is good news for people who have lost their jobs over the past year.’

Canadian Dollar (CAD) Exchange Rates Fall as Oil Prices Retreat from 13-Month Highs

The commodity-correlated Canadian Dollar fell against the Pound today after oil prices retreated from a 13-month high after Brent crude traded up by 0.87% at $64.90 a barrel.

Analysts at economies.com said:

‘Oil prices fell on Thursday, after rising earlier due to profit-taking from a 13-month high, but today's losses are ebbed after a drop in the US crude inventories according to the American Petroleum Institute's preliminary data and fears over the US supply amid the cold weather conditions in that suspended most of Texas' supply.’

However, risk-sentiment has fallen today as investors seek out safe-haven currencies like the US Dollar. As a result, this has weakened demand for the risk-sensitive Canadian currency.

In Canadian economic data, today saw the release of January’s ADP Employment Change report for January, which fell below forecasts to -231.2 thousand.

ADP Research commented on the data:

‘The surge in COVID-19 cases and public health restrictions resulted in mass layoffs. Job losses were reported in every sector, led by trade, transportation and utilities; leisure and hospitality; and construction.’

GBP/CAD Forecast: Could Strong UK PMI Data Boost Sterling on Friday?

Pound traders will be awaiting tomorrow’s publication of the latest UK Markit Manufacturing and Services PMIs for February.

Any signs of improvement in the UK economy this month could drive the GBP/CAD exchange rate higher.

Tomorrow will also see the release of February’s UK GfK Consumer Confidence report. If this shows a downbeat outlook for the UK economy, however, we could see Sterling begin to struggle.

Nevertheless, optimism in the UK’s speedy Covid-19 vaccine rollout and falling cases of the virus could continue to buoy the Pound throughout the rest of this week.

Canadian Dollar traders will be looking ahead to tomorrow’s release of December’s Canadian Retail Sales. However, if this confirms consensus and falls, then the ‘Loonie’ could remain in the doldrums.

The GBP/CAD exchange rate will be dictated by oil prices this week. So, if oil prices head higher we could see the oil sensitiveLoonie’ claw back some of its losses.

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