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Pound Canadian Dollar Exchange Rate News: GBP/CAD Drops as UK Omicron Cases Increase

December 8, 2021 - Written by John Cameron

GBP/CAD Drops amid Rising Omicron Cases

The Pound to Canadian Dollar (GBP/CAD) exchange rate has fallen marginally as the number of Omicron cases increase throughout the UK, whilst CAD rallies slightly as oil prices rose overnight.

At the time of writing, the GBP/CAD exchange rate is trading at approximately €1.6742 with minimal market movement.

Pound (GBP) Muted by Rising Omicron Cases

The Pound (GBP) began today’s session by trending down against the Canadian Dollar (CAD) as the recently-identified coronavirus variant, Omicron, is rapidly spreading across the UK.

The surge of Omicron cases is weighing on Sterling as GBP investors are concerned that it could force the government to introduce stricter restrictions, such as guidance for working from home.

Professor Tim Spector, an epidemiologist and lead of the Covid outbreak tracking study ZOE, said:

‘We are expecting this to be doubling about every two days at the moment, so if you do your maths - assume it's 1,000 at the moment, and you think it's going to be doubling every two days, you can see that those numbers are going to be pretty (high) certainly in about 10 days' time.’

In addition to Omicron research, Brexit remains a source of volatility for GBP.

A UK-EU trade partnership was initially agreed at the end of 2020, however issues with exporting UK products across the channel appear to be worsening.

Boris Johnson, UK Prime Minister, claims these issues are ‘teething problems’, however trade delays between the two nations seem to be mounting.

A survey conducted by the French Chamber of Great Britain discovered that 82% of firms are experiencing increased costs for imports, and 43% for exports, as well as 79% of firms encountering difficulties when trading with France.

A further 30% of firms have reduced staff numbers due to Brexit which will be negatively impacting the UK economy and affecting GDP.

Canadian Dollar (CAD) Firms amidst Strengthening Oil Prices

At the same time, the commodity-linked Canadian Dollar (CAD) has buoyed due to WTI oil prices rising overnight before easing at the start of today’s session.

The strengthening oil prices have benefitted the ‘Loonie’ due to oil accounting for a large part of Canada’s exports, however it is unlikely that prices will return to the October high’s in the immediate future due to the recent release of reserves from the US, China and other countries, which is possibly hindering oil markets for the time being.

Moreover, Omicron is also negatively impacting the Canadian economy due to the increasing case numbers throughout the country.

A provincial advisory body said:

‘COVID will almost certainly rise through January, even before Omicron hits us in full force. We can't predict Omicron precisely, but it will almost certainly hit us hard and fast.’

Ontario, home to approximately 40% of Canada’s population, has postponed their plans to ease restrictions regarding the number of people allowed in ‘high risk environments’ with hopes to reduce the spread of Omicron.

This will be a disadvantage to CAD as investors may be wary of its constrained economy.

GBP/CAD Exchange Rate Forecast: Will BoC Interest Rate Decision Remain Unchanged?

Looking ahead, the Pound Canadian Dollar exchange rate is likely to be influenced by both Bank of Canada’s (BoC) interest rate decision and the UK GDP release.

Later this afternoon, CAD may see some market movement as the BoC announces their interest rate decision which is currently forecast to remain unchanged at 0.25%.

CAD may also see market movement should the oil prices fluctuate.

On the other hand, Sterling may be weakened at the end of the week in response to the publication of the UK’s latest GDP figures. October’s figures are forecast to report domestic growth slowed from 0.6% to 0.4%.

Other influences for Sterling is likely to come from headlines concerning Omicron developments, Brexit and supply chain bottlenecks.

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