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Pound Canadian Dollar Exchange Rate Falls as Oil Prices Soar

July 29, 2022 - Written by John Cameron

Pound Canadian Dollar (GBP/CAD) Exchange Rate Drops amid Oil Price Rally

The Pound Canadian Dollar (GBP/CAD) exchange rate is slumping today in the face of strong gains for crude oil. The currency pair may also be seeing losses as the UK’s ‘summer of discontent’ sees more and more industrial action.

On the other hand, hawkish bets on an above-forecast rate hike from the Bank of England (BoE) may be limiting major losses for GBP/CAD today.

At time of writing the GBP/CAD exchange rate is at around $1.5510, which is down roughly -0.5% from this morning’s opening figures.

Pound (GBP) Slides ahead of Further Industrial Action

The Pound (GBP) is slipping against many of its competitors today. Renewed strength in the US Dollar (USD) may be prompting a risk-off mood in the markets, potentially harming Sterling.

The impact of further industrial action across the UK may also be weighing on Sterling today. UK train drivers are set to strike on Saturday over pay disputes. The strikes are expected to cause widespread disruption.

The announcement of industrial action at the port of Felixstowe yesterday may also be pulling the Pound lower. Dock workers voted overwhelmingly in favour of strike action in August after having rejected an offered 5% pay rise. The port handles around 48% of the country’s container trade, and analysts fear the impact could be similar to the backlogs seen during winter 2021.

The Pound could be underpinned by expectations of a hawkish interest rate hike from the Bank of England (BoE), however. BoE Governor Andrew Bailey did signal last week that a 0.5% rate hike was still ‘on the table’.

Canadian Dollar (CAD) Soars as Oil Prices Climb

The Canadian Dollar (CAD) is climbing against its rivals today. The commodity-tied ‘Loonie’ is seeing strong gains off the back of rising crude oil prices.

Prices of oil are seeing a boost amid expectations that next week’s OPEC+ meeting will not bring about the supply boost hoped for by US President Joe Biden.

Sources from within the group have stated that the OPEC+ group is likely to leave output unchanged for September.

Oil’s gains could be tempered soon, however. A poll by Reuters found that recession fears and Covid-19 case outbreaks in China could see the commodity’s rally meet an early end.

May’s better than expected GDP figures could also lend support to CAD today. The Canadian economy remained essentially unchanged in May, with a boost to services offset by a decline in goods industries.

The data may have also increased bets on the ‘Loonie’ as economist look to the Bank of Canada (BoC) for further interest rate hikes.

GBP/CAD Exchange Rate Forecast: Will BoE Surprise with Above-Forecast Rate Hike?

Looking to the week ahead for the Pound, the final reading of July PMI figures could pull the currency lower if they print as forecast on Monday and Wednesday respectively.

The Bank of England’s interest rate decision on Thursday will be the most significant data release for the Pound next week. The forecast 0.25% rate hike has largely been price in by markets, so may prompt little movement in the currency. An above-forecast rise could see Sterling leap, however.

The Pound could see additional movement if investors pick up on any relevant comments in the post-announcement press conference.

For the Canadian Dollar, a forecast drop to manufacturing sector output could prompt losses in the ‘Loonie’ if PMI figures print as forecast on Tuesday. A slump to IVEY PMI figures on Friday could have a similar effect.

A predicted widening of the country’s trade surplus on Thursday could see gains for the Canadian Dollar, however. Friday’s employment figures could offset these gains if they print as forecast, however. Unemployment is currently forecast to remain low with predictions of a surge in jobs added to the economy.

Finally for CAD, any further fluctuations in the price of crude oil could prompt movement in the currency.

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TAGS: Pound Canadian Dollar Forecasts

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