The GBP/CAD rate is slowly on the rise as Sterling finds a little strength along with the CAD struggling with external pressures. The CAD is heavily associated with the price of Oil and is very much at the mercy of the market movements.
The price of a barrel of oil having previously jumped above the $50 mark has fallen to a 3 month low and is residing below the $45 level. The reason for the drop has once again been attributed to the oversupply of oil around the world. Whilst Canada had the wildfire disaster, there was also disruption in Libya and Nigeria. However the majority of these disruptions have been resolved and production has been strengthening in these areas. Coupled with this, Saudi Arabia very nearly matched its highest every production level for the month. OPEC has been essentially trying to flood the market and price out the companies who have high production costs.
The effect this has on the Canadian Dollar is quite significant, as Canada is a major exporter of Oil. The GBP/CAD rate could well start to creep back towards the 1.80 levels of the back of the Oil movements. However it will be worth considering that currencies work in pairs and the rate can also be affected by Sterling’s performance.
The Bank of England could look to cut interest rates in the coming few weeks which would certainly see weakness for Sterling in the short term at least, this could essentially work in favour of CAD sellers. It is a strange situation where both currencies face a negative outlook as generally one currency rises of strength.
If Sterling is able to avoid a rate cut at the start of August I believe the GBP/CAD will rise and could present a good buying level for CAD.