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Pound Canadian Dollar Exchange Rate Subdued as Omicron Weighs on Pair

December 22, 2021 - Written by John Cameron

Pound Canadian Dollar (GBP/CAD) Exchange Rate Muted as Omicron Stifles Growth

The Pound Canadian Dollar (GBP/CAD) exchange rate dipped this morning following disappointing growth figures for the UK, but has since traded within a narrow range. The Omicron variant continues to place pressure on both currencies as well as oil prices driving movement in the Canadian Dollar (CAD).

At time of writing the GPB/CAD exchange rate is at around $1.7149, virtually unchanged for this morning’s opening figures.

Pound (GBP) Stumbles Following Disappointing Growth Figures

The Pound (GBP) dipped at the opening of this morning’s session following disappointing growth data, but has since traded within a narrow range as the Omicron variant continues to weigh on the Sterling.

Today’s growth figures for the third quarter indicate that the UK economy grew slower than previously thought even before the impact of the Omicron variant was felt. The country’s economy grew by 1.1% in the third quarter under forecasts of 1.3% as supply issues continue to affect the building and manufacturing sectors.

What little growth the UK saw was largely supported by the hospitality and arts sectors, as well a 2.7% boost to household spending as consumers returned to the shops. The impact of the Omicron variant has been felt most acutely in these sectors, and business leaders had repeatedly called on Chancellor Rishi Sunak earlier in the week to intervene. Following these calls, Sunak yesterday announced a £1bn bailout package for the hospitality sector.

Whilst the package was warmly received by some and may have helped support the Pound, many felt that the Chancellor had not done nearly enough to support businesses during a crucial trading period. Ian Hoskins, who runs Liverpool’s Ma Pub Group, was one of those critical that the measures would not be enough:

‘The point is that it costs me more to stay open than when we are closed and while I don’t think anyone is expecting to have all lost Christmas sales reimbursed by the government, the £6k grant is a drop in the ocean at this time of year. That’s not being ungrateful – that’s the truth’.

Many businesses have accused the government of giving mixed messaging and implementing a ‘lockdown by stealth’, as guidance on social mixing has led to a sharp decline in bookings and footfall.

Canadian Dollar (CAD) Boosted by Retail Sales but Capped by Oil Market

The Canadian Dollar (CAD) was boosted overnight by optimistic retail sales figures, but has remained subdued as the oil markets remain uncertain in the face of the Omicron variant.

Retail figures for October jumped well above forecasts of 1% to 1.6% as the country’s automotive industry continued its recovery after previous supply issues. Analysts were quick to point out however that tightening restrictions in response to the Omicron variant may see the economy take a turn for the worse.

Andrew Grantham, CIBC senior economist, felt that the country would soon feel the impact of the Omicron variant:

‘Even though these restrictions have focused more on bars, restaurants, gyms and other such services, rather than retailers at this stage, public concern regarding the recent outbreak is still likely to be disrupting footfall and driving more shopping activity online again.’

Ongoing uncertainty in the oil markets is likely to also continue to affect the commodity-tied ‘Loonie’ as investors remain uncertain of demand in the face of tightening restrictions worldwide. The price of crude oil rose just 0.1% today to $71.24 a barrel.

GBP/CAD Exchange Rate Forecast: Will Canadian Growth Figures Boost Currency?

Looking to the week ahead, the UK is not set to see any further significant data releases. It’s likely that Sterling will continue to see headwinds as the UK government responds to the Omicron variant.

Canada’s October growth figures are currently forecast to show a rise which could provide a boost to CAD. Much like this week’s retail sales figures however, it may provide little respite to the currency if analysts feel that a slowdown in the face of the Omicron variant is inevitable.

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