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Pound Canadian Dollar (GBP/CAD) Exchange Rate Dips as Oil Prices Bolster Oil-Sensitive ‘Loonie’

May 17, 2021 - Written by John Cameron

GBP/CAD Exchange Rate Dips as Rising Oil Prices Boost Canadian Dollar

The Pound Canadian Dollar exchange rate dipped today as the ‘Loonie’ has continued to benefit from upbeat Canadian economic data. A mixture of rising oil prices and rising Canadian wholesale sales for March has provided a boost for the Canadian Dollar. The pairing is currently trading around CA$1.70.

The Canadian Dollar has remained strong this week after Canada’s wholesale transactions beat forecasts and rose by 2.8% in March.

CIBC’s senior analyst, Royce Mendes, commented on Canada’s rising petroleum and coal products industry sales:

‘The good news is that the increase in March factory sales was relatively broad based, with 17 of 21 industries gaining ground, so not overly reliant on the pickup in motor vehicle production.’

The oil-sensitive ‘Loonie’ has also benefited from an uptick in oil prices as demand continues to rise as hopes grow for the global economy.

PVM Oil analyst Tamas Varga explains:

‘The fact that prices remained relatively stable during this rather turbulent five-day period indicates that the confidence in a healthy oil market remains intact and unless something unpredictably negative occurs, any downside potential will be limited.’

Pound (GBP) Exchange Rate Dips Despite Easing of Some UK Lockdown Measures

The Pound (GBP) fell against the stronger Canadian Dollar today despite the UK further easing lockdown restrictions.

However, Prime Minister Boris Johnson has warned that the India variant of Covid-19 could disrupt the Government’s lockdown easing roadmap in the months ahead.

As a result, this has left some Pound investors cautious, as a delay in any further easing of lockdown measures would impede the nation’s economic recovery.

Sir Jeremy Farrar, director of the Welcome Trust and a member of the Scientific Advisory Group for Emergencies (SAGE), commented:

‘I think we will see an increase of cases and infections over the coming weeks, as some of the restrictions are lifted. The key question is whether we have decoupled increased transmission … from the number of people that get ill and need to go to hospital. If we’ve decoupled them, then the country can cope with a marginal degree of increase in transmission.’

In absence of notable economic data and growing concerns over the India variant, however, the Pound Canadian Dollar (GBP/CAD) exchange rate has begun to shed some of its gains.

Pound Canadian Dollar Exchange Rate Forecast: Could Rising Oil Prices Continue to Boost the ‘Loonie’?

Pound (GBP) traders will be looking ahead to tomorrow’s release of the latest ILO unemployment rate for March.

Any signs of falling jobless rates in the UK would boost the GBP/CAD exchange rate.

Meanwhile, the Canadian Dollar exchange rate could continue to head higher if oil prices rise any higher on renewed demand.

Canadian markets will however be looking ahead to Wednesday’s release of the latest Bank of Canada (BoC) consumer price index for April.

The Pound Canadian Dollar (GBP/CAD) exchange rate could continue to fall this week, however, if the outlook for the Canadian economy improves.
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