September 16, 2021 - Written by John Cameron
STORY LINK Pound Canadian Dollar (GBP/CAD) Exchange Rate Trades Level as CAD Upside Fades
GBP/CAD Exchange Rate Trades Level as Employment Data Disappoints
Given the lack of Pound (GBP) data through today’s session, the Pound Canadian Dollar (GBP/CAD) exchange rate has been largely driven by movements in the Canadian Dollar (CAD). High oil prices this morning boosted the ‘Loonie’, but CAD has since come under pressure from poor employment data.
At the time of writing, GBP/CAD is trading at C$1.7475, virtually unchanged from today’s opening levels.
Canadian Dollar (CAD) Relinquishes Gains on fall in Employment
The Canadian Dollar began the session trading high against its peers as oil prices rallied, pushing the benchmark to its highest level since 2 August. The oil-sensitive currency often traces WTI crude in its trajectory.
Upside pressure was limited slightly by forecasts that oil would not raise past $73.55 per barrel, as strategists at TD securities reported:
‘While we think that both WTI and Brent may move above their current [prices], there is limited upside for now… WTI is not expected to go much above $73.55 per barrel.’
Into the afternoon, CAD faced further pressure as ADP Employment statistics for August fell below forecasts. The report is a monthly measure of the change in Canada’s nonfarm payroll employment, derived from actual payroll data of client companies.
This month, ADP revealed 39.4K new jobs in Canada as opposed to the 180K expected: while employment rose in the service-providing sector by 45.3K, 23.6K jobs were lost in the goods sector, chiefly in construction.
To round off the ‘Loonie’s losses, oil prices dipped back down at the end of the session, with ongoing Covid-related restrictions threatening to limit fuel demand. Economists comment further that:
‘Given the Fed's move toward the tapering of its outsized asset purchase program late in 2021, which may reduce liquidity, future energy demand expectations and appetite for reflation exposure in oil, prices may drift lower.’
Pound (GBP) Supported by Covid Optimism
The Pound (GBP) faced mixed conditions today on a lack of UK data, although some support was gained from external factors.
The Government is on the brink of scrapping pre-departure Covid tests for travellers looking to go abroad, as tight quarantine procedures deter UK holidaymakers. If the green and amber country categories are simplified into a single group, it will make international travel more accessible, raising revenue and UK sentiment.
Investors are also optimistic over the prospect of a lockdown-free winter. Yesterday’s winter Covid plan, published by government, says vaccines are the ‘Plan A’, with face-coverings, Covid passports and working-from-home orders to be implemented only if cases peak.
Capping GBP gains, Covid cases continue to climb in parts of the world, inspiring bearish trading, while antivax sentiment causes problems for British children returning to school.
According to the Telegraph, ‘Until now, vaccine scepticism in the UK has been a largely silent phenomenon, but as the anti-vax movement in the UK continued to grow… the children of anti-vaxxers worry about the conflict that getting their jabs could cause.’
Furthermore, a global economic slowdown is indicated by poor data releases from China. Retail sales growth slowed to 2.5% from a year ago and construction investment contracted 3.2% as stringent virus controls and tight curbs on property limited economic activity. Concern over what this could mean on a global scale draws further support away from risk-on currencies.
GBP/CAD Exchange Rate Forecast: Pound to Rise on UK Sales?
Tomorrow’s UK retail sales are expected to demonstrate growth for the month of August, potentially boosting the Pound higher. Meanwhile, bullish speculation relating to the Bank of England (BoE)’s meeting next week suggests a rate hike may come sooner rather than later.
The Candian Dollar lacks significant data for the remainder of the week, meaning CAD dynamics will likely be driven by oil prices. If prices dip lower as forecast, the ‘Loonie’ may face further headwinds.
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