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Pound to Canadian Dollar (GBP/CAD) Exchange Rate Sinks as UK Economic Jitters Return

February 25, 2021 - Written by John Cameron

GBP/CAD Exchange Rate as UK Markets Become More Cautious

The GBP/CAD exchange rate fell by -0.2% today, with the pairing currently fluctuating around CA$1.76.

Sterling fell today as concerns for the UK economy have returned, despite Downing Street’s outline of its lockdown exit plan earlier this week.

Today also saw reports that more UK workers had been put on furlough in January, resulting in costs of up to £53.8 billion.

Analysts at the Office for National Statistics (ONS) commented:

‘The ONS estimates that the proportion of businesses’ workforce on furlough leave increased from 11% in early December 2020 to 20% in early February 2021.

‘This is considerably lower than during the first national lockdown, where 30% of businesses’ workforce were on furlough leave in early June 2020.’

The UK economy is also arriving at a crossroads ahead of March’s Spring Budget.

GBP investors are becoming more cautious about the outlook once lockdowns are eased, with both Brexit and the pandemic limiting the nation’s economy for months and possibly years into the future.

The director general of the CBI, Tony Danker, has urged Chancellor Rishi Sunak to extend support for struggling businesses, saying:

‘The chancellor must finish what he started: doing whatever it takes to back UK business. The more businesses – the more jobs – that we can see through the crisis, the faster we can snap the economy back into shape.’

Canadian Dollar (CAD) Rises on Increasing Price of Oil

The Canadian Dollar rose against Sterling today after the commodity-linked currency benefited by an upswing in oil prices.

Oil prices rose to a one-year high over the past few days as global crude supplies continue to shrink.

Rob Thummel, a portfolio manager at Tortoise commented:

‘All indications are that we’re going to see better demand. Inventories are going to continue to fall, both in the U.S. and globally. Big picture, that’s going to be positive for prices moving higher.’

As a result, CAD has benefited from growing confidence in the Canadian economy, with oil being one of the nation’s biggest exports.

Yesterday also saw the Bank of Canada (BoC) take a markedly upbeat tone about the outlook for Canada’s economy.

Analysts at Reuters said:

‘Canada’s economy will see a solid and sustained rebound this year as inoculations ramp up, Bank of Canada governor Tiff Macklem said on Tuesday, while warning that Canada’s red-hot housing market is starting to show signs of “excess exuberance.”’

GBP/CAD Exchange Rate Forecast: Could Rising Oil Prices Boost the ‘Loonie’ This Week?

The Canadian Dollar will continue to be driven by oil-price fluctuations this week. If the price of oil continues to rise, then we will see the ‘Loonie’ climb against Sterling.

In Canadian economic news, tomorrow will see the release of January’s Industrial Product Price data.

Any improvement in the outlook or Canada’s economy would also be CAD-positive.

Pound traders will continue to monitor the UK’s Covid-19 developments. If it looks like the easing of lockdowns will be relatively straightforward in the months ahead, then confidence in the UK economy would improve.

The GBP/CAD exchange rate could head higher this week if confidence in the UK economy returns as the nation draws closer to easing lockdown restrictions in March.

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