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Pound Canadian Dollar Exchange Rate Dips as Oil Prices Head Higher

July 1, 2021 - Written by John Cameron

GBP/CAD Exchange Rate Falls as Demand for Oil Picks Up

The Pound Canadian Dollar exchange rate fell by -0.2% as the commodity-linked ‘Loonie’ benefited from rising WTI crude prices, which rose to $74 per barrel. The pairing is currently fluctuating around CA$1.71.

Oil prices have risen on lower US inventories and expectations of heightened demand in the coming months. Investors are also awaiting the decision from OPEC+ regarding on whether producers can maintain or reduce supply cuts in the second half of this year.

Tamas Varga, oil analyst at London brokerage PVM Oil, explains:

‘In the first half of the year, the stage has been set for further improvement and for economic and oil demand growth.’

UBS analyst Giovanni Staunovo also commented on the global oil industry:

‘Given the sharp demand increase we expect for this summer, we think the group will modestly increase production. Even so, the oil market will remain undersupplied.’

Demand for the oil-sensitive Canadian Dollar has picked up on expectations that oil prices will continue to rise over the next few months.

In addition, positive Canadian economic data in the form of the latest GDP data for April – which contracted less-than-expected at -0.3% - has buoyed confidence in the Canadian economy and uplifted the ‘Loonie’.

Pound Exchange Rate Dips as UK-EU Financial Equivalence Deal ‘Has Not Happened’, Says UK Chancellor

The Pound (GBP) fell today after Chancellor Rishi Sunak revealed that the EU-UK equivalence deal ‘has not happened’, meaning that the two sides could fail to recognise each others' financial rules.

In his Mansion House speech, Rishi Sunak commented:

‘As I said in parliament in November, our ambition has been to reach a comprehensive set of mutual decisions on financial services equivalence.

‘That has not happened. Now we are moving forward. Continuing to cooperate on questions of global finances, but each as a sovereign jurisdiction with our own priorities.

‘We now have the freedom to do things differently and better, and we intend to use it fully.’

Bank of England (BoE) Andrew Bailey also reiterated his belief that rising UK inflation will be temporary.

However, Bailey was also confident about the outlook for the British economy, saying that the ‘economy is bouncing back rapidly, which is good news’.

As a result, Pound investors have become cautiously optimistic about the outlook for the British economy, especially now that lockdown restrictions are expected to be lifted on 19 July.

GBP/CAD Exchange Rate Forecast: Canadian Manufacturing PMI Data in Focus

Canadian Dollar (CAD) traders will be looking ahead to tomorrow’s release of June’s Canadian manufacturing PMI.

Any signs of a recovery in Canada’s manufacturing sector would further buoy the CAD/GBP exchange rate.

Tomorrow will also see the release of the latest Canadian international merchandise trade figure for May.

If this points to an improvement in the outlook for the Canadian economy, then we would see the ‘Loonie’ head higher.

If oil prices continue to rise, we would also see demand for the commodity-correlated CAD increase.

We could see the Pound head higher this week if the outlook for the final easing of lockdown measures on 19 July appears to be going ahead.
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