The Pound to Canadian Dollar (GBP/CAD) exchange rate held steady today, with the pairing currently trading around CA$1.736.
The Canadian Dollar (CAD) struggled to gain against the Sterling today because of sliding oil prices.
As a result, the commodity-linked ‘Loonie’ has suffered a sell-off as the outlook for Canada’s economy – which is majorly reliant on its oil exports – appears increasingly uncertain.
Nevertheless, following the biotech company Moderna’s announcement of a 94.5% effective Covid-19 vaccine trial, markets are expecting a surge in oil prices.
According to Alex Kimani, a finance writer for the Oil Price website, vaccine news has been ‘music to the ears of the oil and gas market’.
Mr Kimani added:
‘For the near to medium-term, it’s only the COVID demand culling that’s really trouncing oil, and all the positive vaccine news will likely continue to drive forward momentum. And in the meantime, if oil demand starts to slow compared to pre-COVID rates as we bolster renewables, natural gas demand should emerge stronger still.’
‘Loonie’ investors will be awaiting today’s release of October’s Canadian Consumer Price Index for October.
Any indications that Canada’s economy could be in for a bumpy ride in the months ahead would be CAD-negative.
Pound (GBP) Steady as Brexit Uncertainty Holds Back Sterling
The Pound held steady against many of its peers today as the UK’s Brexit and economic uncertainty continue to temper British markets.
Recent reports have even hinted that the European Union could delay its vote on Brexit until as late as December 28th.
Consequently, GBP investors are remaining cautious as there has been no clear news on the direction of UK-EU trade talks.
In British economic news, today saw the release of the latest CPI data for October, which beat forecasts and rose by 0.7% year-on-year.
Nevertheless, many analysts were pessimistic about inflation going forwards, saying it would likely fall owing to the Covid-19 restrictions.
Tom Stevenson, an investment director at Fidelity International, was hopeful about the UK economy, however, saying:
‘Further out, however, there is light at the end of the tunnel in the form of a potential vaccine. Re-opening the economy will rekindle animal spirits. The widely-discussed shift to negative interest rates looks less likely now and this is good news for investors. The Bank of England has increased its quantitative easing program to encourage consumer spending and investment and it should now keep its powder dry.’
GBP/CAD Forecast: Could Rising Oil Prices Boost the ‘Loonie’?
Canadian Dollar (CAD) traders will be looking ahead to tomorrow’s release of October’s Canadian ADP Employment Change report.
Any signs that Canada’s unemployment is rising could drag down the CAD/GBP exchange rate.
However, the ‘Loonie’ will continue to be driven by oil prices this week.
If signs of a Covid-19 vaccine prove more substantial, then oil prices could rise and boost he Canadian Dollar.
Brexit developments will continue to drive the GBP/CAD exchange rate this week. As a result, we could see Sterling suffer if it looks less likely that Downing Street will secure a post-Brexit trade agreement.
In UK economic data, Friday will see the release of October’s UK Retail Sales and Consumer Confidence report.
Any deterioration in the UK’s economic outlook would prove GBP-negative.