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GBP/CAD Exchange Rate Rangebound Despite Rising Oil Prices

March 4, 2021 - Written by John Cameron

GBP/CAD Exchange Rate Steady as Canadian Economic Data Buoys Confidence in Economy

The Pound to Canadian Dollar (GBP/CAD) exchange rate rose held steady today, with the pairing currently fluctuating around CA$1.76.

The Canadian Dollar held steady against Sterling despite rising oil prices buoying confidence in Canada’s commodity-reliant economy.

OPEC Secretary-General Mohammad Barkindo commented:

‘Both the global economic outlook and oil market prospects show signs of continued improvement. The headwinds of uncertainty that shocked and disrupted the market last year continue to abate.’

Yesterday also saw the release of the latest Canadian GDP data for December, which fell below forecasts at 0.1%.

TD Securities Chief Canada Strategist Andrew Kelvin was optimistic about the outlook for Canada’s economy, however, describing the GDP figure as ‘frankly stunning’:

Kelvin said:

‘If that January number is right, plus half a percentage point is extremely strong for a monthly GDP number in any circumstance. It means we will get through the second wave of COVID without seeing a negative month of GDP.’

However, CAD traders are remaining cautious as there remain several hurdles to the nation’s economy before it can make a full recovery.

As a result, Canadian markets are bracing themselves for news about the US’ $1.9 trillion stimulus package. If this appears forthcoming, then oil prices would rise and benefit the commodity-linked CAD.

Pound (GBP) Exchange Rates Steady as UK Construction PMI Beats Forecasts

The Pound held steady against CAD today following the broad welcoming of Chancellor Rishi Sunak’s 2021 Budget. Again, Sunak repeated that he would do ‘whatever it takes’ to help the UK economy get back on track.

In UK economic news, today saw the publication of the latest UK Construction PMI for February. The figure beat forecasts and rose to 53.3.

Tim Moore, the economics director at IHS Markit, commented on the data:

‘Construction work regained its position as the fastest growing major category of UK private sector output in February. The rebound was supported by the largest rise in commercial development activity since last September as the successful vaccine rollout spurred contract awards on projects that had been delayed at an earlier stage of the pandemic.’

Additionally, UK markets are becoming more hopeful about the nation’s economy now that vaccinations have succeeded 30%.

Daily cases of Covid-19 in the UK have also continued to fall, buoying optimism that the nation could make a cautious recovery in the months ahead.

GBP/CAD Exchange Rate Forecast: Could Rising Oil Prices Drive Up the Canadian Dollar?

Canadian Dollar (CAD) investors will be looking ahead to tomorrow’s release of Canada’s Ivey PMI data for February.

Any further improvements in the outlook for Canada’s economy would be CAD-positive.

Tomorrow will also see the release of the latest Canadian trade data. If these point to an uptick in Canadian exports, then the ‘Loonie’ would benefit.

Oil prices will continue to drive the CAD/GBP exchange rate this week. Any signs of success for Joe Biden’s enormous stimulus plan would drive up oil prices and boost the commodity-linked ‘Loonie’.

The GBP/CAD exchange rate will remain sensitive to the UK’s Covid-19 situation.

However, with the outlook continually improving with lowering cases of infection and rising numbers of vaccinations, we will likely see Sterling edge higher.

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