December 16, 2022 - Written by John Cameron
STORY LINK Pound Canadian Dollar Exchange Rate News: GBP/CAD Muted amid On-Going Strike Action
GBP/CAD Exchange Rate Under Pressure as UK Strike Action Persists
The Pound to Canadian Dollar (GBP/CAD) exchange rate traded narrowly on Friday amid concerns over the economic disruption being caused by the ongoing industrial action in the UK.
At time of writing the GBP/CAD exchange rate traded at around CA$1.6604, which was virtually unchanged from Friday’s opening levels.
Pound (GBP) Under Pressure amid Mounting Economic Headwinds
The Pound (GBP) was struggling against the majority of its peers on Friday. Bleak domestic headlines sapping Sterling sentiment.
GBP investors focused on industrial action on Friday. Rail workers and NHS nurses were on strike on Friday. Employees are striking over pay and working conditions.
Pat Cullen, Leader of the Royal College of Nursing said that action will escalate if the Government isn’t willing to negotiate:
‘As time moves on - unfortunately if this Government doesn’t speak to us and doesn’t get into a room - I’m afraid that this will escalate’.
Elsewhere, UK retail sales unexpectedly declined in November. The figures were expected to print a 0.3% increase, but instead fell to -0.4%.
The surprise slumped weighed on the Pound as the fall in consumer spending highlighted the pressures facing many families this winter, with households forced to cut discretionary spending in order to pay for essentials.
On the other hand, the Pound was able to find some support with the release of the UK’s latest services PMI, after activity in the UK’s most important sector stalled this month, rather than contracting as most economists had forecast.
Canadian Dollar (CAD) Upside Limited by Global Recession Concerns
Meanwhile, the oil-linked Canadian Dollar (CAD) found its potential capped on Friday as global recession fears weighed on oil prices.
At the time of writing WTI crude was trading around $74 per barrel. Down from $76 at the start of Friday’s trading session.
This week multiple central banks raised interest rates to tackle inflation. As central banks, including the Federal Reserve continue to hike rates there is fear this could trigger a global recession. Hawkish comments from the Fed following their hike have reinforced this fear, keeping oil markets cautious.
Analysts at ANZ research said on Friday:
‘The tighter monetary policy is already having an impact on industrial activity. The prospect of further tightening following hawkish comments from policy makers weighed on sentiment’.
Elsewhere, CAD was supported by the prospect of growing oil demand in 2023. The International Energy Agency (IEA) has projected that Chinese oil demand could increase an estimated 1.7 million barrels per day.
GBP/CAD Exchange Rate Forecast: GBP to Fall Further amid Rising Domestic Tensions?
Looking ahead to next week, the Pound Canadian Dollar could be driven by the UK’s worsening economic outlook.
A lack of notable data until Wednesday will likely see the Pound trade on domestic headlines. Further industrial strikes planned next week will likely continue to dent GBP’s appeal. If the Government agrees to reopen negotiations about nurses pay, then the Pound’s losses could be limited.
Public sector net spending is due on Wednesday. November’s figures are forecast to rise from -£12.7bn, to -£8.3bn. If true, the decrease in spending could help ease recession fears as the government reduces the amount of money they’re borrowing.
Turning to the Canadian Dollar, their PPI data is expected on Monday. Producer prices are forecast to fall to 0.9% in October. If true, this could dent CAD as slipping demand underpins recession concerns.
Otherwise, the commodity-linked ‘Loonie’ will likely trade based on oil price dynamics.
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TAGS: Pound Canadian Dollar Forecasts