Pound to Canadian Dollar Outlook: Investors Favour Upside Following GBP Strength Boost

Pound to Canadian Dollar Outlook: Investors Favour Upside Following GBP Strength Boost

The pound to Canadian dollar exchange rate saw a rise on Tuesday following a new-found strength in the pound sterling which arrived after the USD’s recent weakness. The US’s weakness came after rising bets of a Federal Reserve interest rate cut next month. As a result, the pound was sent higher, which dropped the CADGBP interbank exchange rate lower. The Canadian currency was on the back foot as fading risk appetites weighed on commodities like oil which the CAD depends on so heavily. The coronavirus fears continue to fly high as Italy announced quarantine measures around Milan and Venice in an effort to control their recent outbreak.

Coronavirus sinks CAD as Italy quarantines towns and villages in Northern regions

As the Coronavirus spreads further and further west, the Canadian dollar sunk once again. The latest headline saw Italy quarantine towns and villages in the Northern regions of the country in an attempt to halt the spread of the virus. With the virus now spreading in Europe, investors are more worried than ever that the virus will become a worldwide issue after cases have been confirmed in China, South Korea, Japan and Italy amongst others. China’s numbers are in decline, but its economy has been hit hard by the virus as containment efforts caused mass evacuations.

The coronavirus has been a gamechanger for the Canadian dollar, previously favoured with investors thanks to its high-yielding appeal. The CAD finds itself amongst the most exposed currencies owing to its strong positive correlation with both oil prices and stock indices like the S&P 500.

GBPCAD retains upside momentum going forward

The market has noted that the sterling maintains a strong wave of momentum despite shorter term signals currently lying flat, and favour more range trading for now. The pound has trended higher since August 2019, although its next destination is to be largely decided by the performance of the GBPUSD and CADUSD exchange rates as GBPCAD always closely matches the former divided over the latter.

So far the pound sterling has been ‘immune’ in the face of the coronavirus concerns whilst other currencies have faltered. China’s apparent slowdown has worried the market about the impact on the global economy which has sent investors flocking to the safety of the bond market and has in turn boosted safe-havens like the USD and JPY, whilst sinking risk currencies like the CAD.

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