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Pound Canadian Dollar Exchange Rate Steady as UK Fuel Shortage Eases

October 5, 2021 - Written by John Cameron

GBP/CAD Edges Higher as Rising Oil Price Boost Canadian Dollar

The Pound Canadian Dollar exchange rate edged slightly lower today, bucking the trend of GBP exchange rate gains against other currencies due to CAD strength underpinned by rising crude oil prices.

GBP/CAD had made gains earlier during the European session before retreating back near the start of day levels of 1.7120 at the time of writing.

Pound (GBP) Extends Rally as Fuel Shortages Ease

The Pound rallied against the majority of currencies through Tuesday’s European session – except the Canadian Dollar – as fuel shortages eased in the south east of the UK.

London and south-east England have suffered disproportionately during ongoing petrol shortages, while reports today estimate that 64% of fuel stations have petrol and diesel, with 15% empty.

Petrol Retailers Association (PRA) executive director Gordon Balmer said:

“Today’s figures show the situation is improving further around London and the Southeast.
“Whilst there has been a significant reduction in dry sites, these areas are still lagging behind in having both grades of fuel available compared to the rest of the UK.
“Fuel supplies are increasing across the rest of the country: 86% of sites report having both grades of fuel thanks to steady deliveries and stabilising demand, 3% having only one grade and 11% are dry.
“Members are reporting they are now receiving deliveries from military drivers using commercial tankers, however further action must be taken to address the needs of disproportionately affected areas.”

However, despite the fuel situation improving, UK fuel prices hit an eight-year high during the crisis, hitting consumers with higher prices and adding to UK inflationary pressures that could affect UK economic growth.

The UK services PMI printed earlier in Tuesday’s session boosted the Pound after exceeding expectations.

September’s finalised data was upwardly revised from the initial estimate of 54.6 to 55.4, also higher than August’s figure.

GBP exchanges rates received a boost to add to its recent run of gains as the data points to a strong recovery in service sector activity.

Meanwhile, gas prices hit a fresh record high, adding to inflationary pressure, and higher costs for businesses and consumers that poses a lingering threat to UK economic growth.

Canadian Dollar (CAD) Boosted by Surging Oil Prices

The oil-sensitive Canadian Dollar received support from rising crude prices again during Tuesday’s session.

CAD exchange rates ticked higher against other major currencies as WTI crude hit seven-year highs of $78.95 a barrel amid the global energy crisis that is pushing the price of oil higher.

OPEC’s decision yesterday to stick to the planned 400,000 barrels per day underpinned crude price increases as many analysts expected higher output due to more demand amid soaring natural gas prices.

Canada’s latest trade data also supported the ‘Loonie’ after the figures came in above expectations.

The trade surplus unexpectedly rose to CAD$1.94 billion in August, with exports increasing 0.8% to a record high, and imports down 1.4%.

GBP/CAD Exchange Rate Forecast: Canadian Dollar to Strengthen on Soaring Oil Prices

In the absence of notable UK data releases, the Pound will likely remain sensitive to developments in the UK’s ongoing fuel shortages, although the situation looks to be improving.

Concerns over stagflation continue to linger and could limit GBP exchange rates against a backdrop of increasing inflationary pressure, supply chain fragility, and staff shortages.

Meanwhile, the Canadian Dollar could continue rising on surging oil prices.

As OPEC have stuck to its planned output despite warnings of a growing deficit between supply and demand, WTI prices could continue moving higher above $78 a barrel, and in turn strengthen oil-sensitive CAD.

More high-impact economic data may also drive movement in the Canadian Dollar through the week.

Another strong expansion in the Ivey PMI for September could provide the ‘Loonie’ support as business conditions remain strong.

In addition, a forecast drop in Canadian unemployment from 7.1% to 6.9% in September will also likely lend support to CAD exchange rates.

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