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Pound Canadian Dollar Exchange Rate News: GBP/CAD Dips as Oil Prices Remain Strong

January 26, 2022 - Written by John Cameron

GBP/CAD Stumbles as Oil Prices Improve

The Pound Canadian (GBP/CAD) exchange rate is facing headwinds in the beginning of today’s session as rising oil prices boost CAD and political tensions weigh on GBP.

At the time of writing, the GBP/CAD exchange rate is trading at approximately CA$1.6980, down roughly 0.4% from today’s opening levels.

Canadian Dollar (CAD) Climbs amid Strong Oil Prices

The Canadian Dollar (CAD) is gaining against the Pound (GBP) at the beginning of today’s session in response to strong oil prices.

Russia-Ukraine tensions have propelled WTI crude prices to a new seven-year high this morning, with Brent rising to $88.20 per barrel.

This is supporting the commodity-linked CAD, however reports that the Federal Reserve may soon tighten monetary policy is limiting the Canadian Dollar’s gains against the Pound.

JPMorgan economists Joe Lupton and Bruce Kasman, wrote:

‘Oil shocks have a long history of driving cyclical downturns, with US recessions often associated with oil price spikes.

‘Tensions between Russia and Ukraine raise the risk of a material spike this quarter.

‘A world shaped by supply constraints will bring more macroeconomic volatility. There is no way around this. Unlike when inflation is driven by demand – policy cannot stabilize both inflation and growth at the same time - it has to choose between them.’

Pound (GBP) Loses Ground Amid UK Political Tension

Meanwhile, the Pound (GBP) is falling against the Canadian Dollar (CAD) as the UK awaits the publication of Sue Gray’s investigation report.

The report was ordered to scrutinise the actions at Downing Street during the 2020 lockdown, and to find out whether Boris Johnson broke the laws that were implemented by his own government in the height of the pandemic.

This is causing pressure on the Pound as the future of the UK’s politics remain uncertain, particularly as it is not known when the report will be available – at present, it is expected either today or tomorrow.

Liz Truss, the foreign secretary, said:

‘…It’s an independent report, it’s a matter for Sue Gray when she sends that report, when she’s completed her work.

‘We have been absolutely clear that we will publish the findings of the report. We don’t know the content of the report, so there could be, for example, security issues that mean parts of it are problematic to publish. But we will absolutely publish the findings of the report.’

The opposition maintains their opinion that regardless of the report’s findings, Boris Johnson should resign or be removed from his position of power due to his actions.

The deputy Labour leader, Angela Rayner, has echoed her frustration as she believes Johnson, and his cabinet, have been ‘playing the British people for fools’.

GBP/CAD Exchange Rate Forecast: Will a Shock Rate Hike from the BoC Boost the Canadian Dollar

Looking ahead, the Bank of Canada’s (BoC) latest interest rate decision is likely to act as a key catalyst of movement in the Pound Canadian Dollar (GBP/CAD) exchange rate later this afternoon.

While the BoC is broadly expected to leave it monetary policy untouched today, there is scope for a surprise interest rate hike, which could help propel the ‘Loonie’ sharply higher.

Additionally, the Canadian Dollar may continue to be underpinned by rising oil prices.

On the other hand, the Pound may continue to be weighed on by political uncertainty until Sue Gray’s report is published, the outcome of which could infuse some notable volatility in GBP exchange rates.

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