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Pound Canadian Dollar Exchange Rate News: GBP/CAD Falls as Oil Prices Soar to Nine-Year High

March 3, 2022 - Written by John Cameron

GBP/CAD Loses Ground as Oil Peaks at 9-Year High

The Pound Canadian Dollar (GBP/CAD) exchange rate is facing headwinds today as the Russia-Ukraine war rages on, propelling oil prices to new multi-year highs.

At the time of writing, the GBP/CAD exchange rate is trading at approximately CA$1.6881, roughly down by 0.3% from today’s opening levels.

Canadian Dollar (CAD) Climbs Amid Strong Oil Prices

The commodity-linked Canadian Dollar (CAD) is rising against the Pound (GBP) this morning as oil prices reach a nine-year high.

Brent crude is trading at $117.80, up by 4.32% – the highest price per barrel since 2013 – and WTI oil is trading at $115.20, up by 4.18%.

Oil prices are being driven upwards by the Ukraine crisis as the Russian invasion enters its eighth day.

In addition, CAD is also still reeling from yesterday’s interest rate decision.

For the first time in four years, the Bank of Canada (BoC) hiked interest rates, raising them from 0.25% to 0.5%.

This is further strengthening demand for the ‘Loonie’, particularly following a hawkish statement from BoC.

The BoC’s policy statement read:

‘As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further.

‘The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement increases in the policy interest rate.

‘The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.’

Pound (GBP) Slips as Russia-Ukraine War Continues

The Pound (GBP) is down against the Canadian Dollar (CAD) as geopolitical tensions continue to escalate.

Thus far, the UK and its western allies have united to impose varying sanctions upon Russia in a bid to cripple the Russian economy and force Vladimir Putin to rethink his war in Ukraine.

However, Putin’s retaliation against these sanctions are yet to be seen and is unnerving GBP investors.

Meanwhile, February’s finalised UK services PMI printed at 60.4. This is significantly higher than January’s 54.1, though marginally below the forecast 60.8.

This is the fastest expansion of the service sector since June 2021, though some experts believe the data is not as promising under the current geopolitical position.

Andrew Harker, economics director at IHS Markit, said:

‘Although the latest set of PMI data were encouraging, the inflationary picture still has the potential to limit growth, while it remains to be seen what impact the Russian invasion of Ukraine will have on the service sector and wider economy.’

GBP/CAD Exchange Rate Forecast: Russia-Ukraine War Dominate Headlines

The Ukraine crisis is likely to remain the key catalyst for the Pound Canadian Dollar exchange rate for the foreseeable future.

In turn, this will likely continue to strengthen oil prices, enabling CAD to rise against the majority of its rivals.

Later this afternoon, the ‘Loonie’ may also be influenced by a speech from BoC Governor, Tiff Macklem.

Should Macklem strike a hawkish tone, it may help to underpin CAD demand.

Meanwhile, the Pound may be influenced by a speech from Bank of England (BoE) policymaker, Silvana Tenreyro, this evening. A cautious outlook may weaken Sterling sentiment.

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