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Pound Canadian Dollar Exchange Rate News: GBP/CAD Surges amid Oil Price Rout

November 30, 2021 - Written by John Cameron

Canadian Dollar (CAD) Tumbles as Oil Price Collapse

The commodity-linked Canadian Dollar is stumbling against the Pound this morning as fears over the latest Coronavirus strain, Omicron, is causing oil prices to decline.

On Friday, oil prices plummeted which later restabilised on Monday. Today, however, Brent Crude has lost almost 3% and has fallen to an 11-week low at $71.40 per barrel.

This slump came in response to comments by Stephane Bancel, Chief Executive Officer at Moderna, in which he suggested that the current coronavirus vaccines are likely to be less effective against Omicron than earlier coronavirus strains.

Michael Hewson of CMC Markets, said:

‘Cautious positivity soon gave way to pessimism in late Asia trading on comments from the Moderna CEO Stephane Bancel to the FT, who predicted existing vaccines would struggle with the Omicron variant and who warned it would take months for pharmaceutical companies to manufacture enough jabs at a sufficient scale to make a difference.’

The commodity market is likely to remain volatile whilst further research surrounding Omicron is underway.

Pound (GBP) Buoyed by Weaker Peers

Meanwhile, Sterling is being boosted this morning by CAD’s weaker position, causing the Pound to Canadian Dollar (GBP/CAD) exchange rate to rise.

In response to Omicron, the UK government is reintroducing compulsory masks in shops and speeding up the booster regime in hope of avoiding another lockdown.

Philip Shaw, an Economist at Investec, said:

‘We still see the pound rising over 2022 with end-year targets of $1.48 and 81p against the euro (1.24 GBP/EUR). But this does depend on no further Covid lockdowns and a prompt agreement on the post-Brexit NI Protocol.’

However, the new restrictions are likely to hinder Bank of England’s (BoE) expected December rates hike, which will limit GBP’s gains.

Paul Dales, Chief UK Economist at Capital Economics, said:

‘The restrictions announced by the government on Saturday in response to the new Omicron COVID-19 variant increase the downside risks to our GDP forecasts and the chances that the Bank of England delays increasing interest rates until next year.’

GBP/CAD Exchange Rate Forecast: Pound Mixed amid Omicron and Brexit Uncertainties

Looking ahead, Omicron may continue to unsettle markets, which may further undermine oil prices, and place additional pressure on CAD exchange rates.

The Pound to Canadian Dollar exchange rate may continue edging higher this afternoon in response to oil prices but Omicron and UK restrictions may also cap GBP gains against the ‘Loonie.’

On the other hand, CAD may be influenced by this afternoon’s print of Q3 GDP which is forecast to increase to 0.5% from -0.3%, and November’s employment rate is predicted to dip slightly from 6.7% to 6.6%.

In addition, the ongoing Brexit negotiations and the ambiguity of the UK and EU’s future relationship may limit Sterling’s potential.

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