February 24, 2022 - Written by John Cameron
STORY LINK Pound Canadian Dollar Exchange Rate News: GBP/CAD Muted Despite Surging Oil Prices
GBP/CAD Trading Flat Despite Geopolitical Developments Strengthening Oil Prices
The Pound Canadian Dollar (GBP/CAD) exchange rate is trading in a narrow range today despite oil prices reaching a new 7-year high.
At the time of writing, the GBP/CAD exchange rate is trading at approximately CA$1.747, with minimal market movement from today’s opening levels.
Canadian Dollar (CAD) Rangebound Despite Surging Oil Prices
The commodity-linked Canadian Dollar (CAD) is rangebound against the Pound (GBP) this morning in spite of oil prices rising to a new 7-year high.
Currently, Brent crude is trading at $103.11, up by 6.47%, the highest price per barrel since 2014, whilst WTI crude is selling at $97.70, up by 6.08%.
This comes after Vladimir Putin ordered a ‘special military action’ in the early hours of this morning, with explosions being heard in Ukraine’s capital, Kyiv.
Oil prices have soared during the global crisis amid mounting concern that a war in Europe may disrupt global energy supplies.
Despite this, as the second-biggest oil producer and presently being imposed with sanctions from Western leaders, Russia’s energy supply has not yet been deemed an appropriate asset to freeze.
Warren Patterson, head of ING’s commodity research, said:
‘Russia’s announcement of a special military operation into Ukraine has pushed Brent [above] the $100 per barrel mark.
‘This growing uncertainty during a time when the oil market is already tight does leave it vulnerable, and so prices are likely to remain volatile and elevated.’
This is capping the Canadian Dollar’s potential as CAD investors remain wary of the global situation.
However, should the West impose sanctions on Russia’s energy supply, the ‘Loonie’ is likely to benefit.
OCBC economist Howie Lee said:
‘It's not just geopolitical risk that is the problem but the further straining of supply.
‘Russian oil supply will disappear overnight if faced with sanctions... and OPEC can't produce fast enough to cover this gaping hole.’
Pound (GBP) Muted in Wake of Mixed BoE Comments
The Pound (GBP) is muted against the Canadian Dollar (CAD) in the wake of some mixed comments from Bank of England’s (BoE) policymakers yesterday.
On Wednesday, BoE Governor, Andrew Bailey, suggested the UK still faces upside risks from inflation but markets should ‘not get carried away’ when aggressively pricing in interest rate hikes.
Meanwhile, Russia’s attack on Ukraine is also causing GBP investors to reprice their BoE rate hike expectations, amidst forecasts most central banks will adopt a more cautious approach to monetary tightening in light of heightened geopolitical uncertainty.
GBP/CAD Exchange Rate Forecast: BoE Speeches in Limelight
Later today, BoE’s Bailey and policymaker, Huw Pill, are scheduled to deliver speeches. Should the contents of these speeches have a hawkish tone, it may bolster demand for the Pound.
On the other hand, Canadian ADP employment figures for January is scheduled to print this afternoon. Employment growth is expected to increase from 19.2K to 25K potentially lending some support to the Canadian Dollar.
Meanwhile, the commodity-linked ‘Loonie’ will remain susceptible to the volatile oil market amid evolving geopolitical developments.
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TAGS: Pound Canadian Dollar Forecasts