June 15, 2022 - Written by John Cameron
STORY LINK Pound Canadian Dollar Exchange Rate Gains as Oil Prices Slip on Supply Concerns
Pound Canadian Dollar (GBP/CAD) Exchange Rate Climbs Despite BoE Rate Hike Concerns
The Pound Canadian Dollar (GBP/CAD) exchange rate is seeing a boost today amid a fall to crude oil prices. Prices for the commodity are tumbling amid demand fears and potential supply shortages. Major gains for the currency pair could be limited however as investors pare back their bets on a move aggressive move from the Bank of England (BoE).
At time of writing the GBP/CAD exchange rate is at around $1.562, which is up roughly 0.6% from this morning’s opening figures.
Canadian Dollar (CAD) Plummets as Oil Prices Slide
The Canadian Dollar (CAD) is tumbling against its rivals today. The commodity-tied ‘Loonie’ is being pulled lower by a fall to crude oil prices after reaching highs earlier this week.
The fall in crude oil comes amid demand concerns, as high oil prices and the worsening global economic outlook weigh on potential fuel spending. A fresh wave of Covid-19 cases in China has also led to fears that the world’s second-largest economy may see reduced demand for oil.
Uncertainty over the upcoming actions from multiple central banks is also affecting oil investment today. Speaking on the upcoming interest rate decisions, the International Energy Agency said:
‘Tightening central bank policy, the impact of a soaring U.S. dollar and rising interest rates on the purchasing power of emerging economies mean the risks to our outlook are concentrated on the downside.’
Major losses for the commodity are likely being limited by tight supply, however. A blockade of Libyan oil facilities has significantly impacted production levels of crude oil.
Pound (GBP) Recovers Despite Fresh Calls for Scottish Independence
The Pound is edging higher against its competitors today. Sterling hit its lowest point against multiple currencies since February 2020 yesterday. The currency is likely seeing some dip-buying today as a result.
Major gains for the currency could remain limited today as investors pare back their expectations of an aggressive rate hike from the Bank of England (BoE). Markets have largely priced in a 0.25% rate hike for Thursday, but investors had been hoping for more aggressive action to tame soaring inflation. The increased possibility of a UK recession may see the central bank remain dovish.
Sterling is likely to also suffer after confirmation today that the EU will be pursuing legal action against the UK over the Northern Ireland Protocol. Speaking in Brussels today, EU Brexit commissioner Maros Sefcovic stated that the EU was planning a ‘carrot and stick’ approach to the UK’s planned legislation.
In his opening statement, Sefcovic said:
‘Opening the door to unilaterally changing an international agreement is a breach of international law as well. So let’s call a spade a spade: this is illegal.’
Tuesday’s news that the Scottish government plans to hold a second referendum on independence may also be hampering growth for GBP today. First Minister Nicola Sturgeon announced that the country intended to hold a second referendum on the issues in October 2023.
Simon Harvey of financial trading company Monex Europe said:
‘If I were to isolate the move lower down to one event, I’d most probably say that the Scottish independence risk was the straw that broke the camel’s back.’
GBP/CAD Exchange Rate Forecast: Will BoE’s Decision Push Pound Lower?
Looking to the week ahead for the Pound (GBP), investors will be most focused on the BoE’s interest rate decision on Thursday. If the central bank acts as cautiously as forecast, then it could see Sterling drop.
Additionally for GBP, further disputes between the UK and EU over the NI Protocol could also harm the currency’s chances over the rest of the week.
For the Canadian Dollar (CAD), a fall to PPI figures on Friday could weaken CAD should investors see it as a sign of easing inflationary pressures. The ‘Loonie’ is also likely to continue to be affected by ongoing fluctuations in the price of crude oil.
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TAGS: Pound Canadian Dollar Forecasts