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Pound Canadian Dollar Exchange Rate News: GBP/CAD Wavered amid Oil Price Rally

January 9, 2023 - Written by John Cameron

Canadian Dollar (CAD) Supported by Surging Oil Prices

The Canadian Dollar (CAD) enjoyed moderate success to open the week with a spike in oil prices. The commodity-linked ‘Loonie’ saw a boost in demand as China rolled back their strict Covid measures, bolstering demand for oil. A 3% jump from the opening levels, WTI crude traded around $76 a barrel on improving demand expectations.

Coming off the back of winding down numerous anti-Covid measures, Beijing have announced the reopening of their borders after almost three years of travel restrictions. The world’s second largest economy is expected to recover almost 75% of its domestic tourism revenue from its pre-Covid levels. Ralph Hamers, Chief Executive at UBS, commented:

‘The ending of the zero-COVID policy is going to have a major positive impact on domestic spending. We believe there is a lot of opportunity for those committed to investing in China.’

A return to normality in China could see a vastly improved global market sentiment, boosting riskier currencies such as the Canadian Dollar. As the manufacturing capital of the world, the increased demand for oil could see the ‘Loonie’ strengthen.

Pound (GBP) Undermined by Downbeat Economic Outlook

Meanwhile, the Pound (GBP) struggled for much demand in the face of mounting economic pressures. The Resolution Foundation warned that further drops in living standards are to be expected in the coming year.

The poverty organisation has warned that a £2000 drop in incomes is to be expected as the cost-of-living crisis deepens. An estimated drop of 7% in living standards over two years is set to be worse than the fallout from the 2008 financial crisis, which declined by 5% between 2020 and 2012. The report added:

‘When combined with a weak recovery from 2024 onwards, (it) would leave typical household incomes still below pre-pandemic levels even by 2027-28.’

GBP/CAD Exchange Rate Forecast: Prolonged Industrial Action to Sink Sterling?

Looking ahead, the Pound Canadian Dollar exchange rate could trade on market sentiment in lieu of major economic data. After another failed round of negotiations between union leaders and ministers have left further strikes on the table. Onay Kasab, Unite’s National Lead Officer, left the meeting with Health Secretary Steve Barclay unhappy with the outcome:

‘Unfortunately, the government have missed yet another opportunity to put this right. We came here in good faith. What they want to talk about is productivity.
‘Our members are working 18-hour shifts. How you become more productive with that I do not know.’

Without an end in sight, the UK economy will be left under pressure from persistent industrial action.

Meanwhile, Canadian Dollar investors’ will be keeping a close eye on developments in China. If WTI crude can maintain their rally, the ‘Loonie’ could remain elevated. However, troubling headlines from China’s surging Covid cases could dampen moods.

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