Pound to Euro Canadian dollar exchange rates have tested a two-week high as investors fears over a falling oil price combine with some slightly better sentiment towards the pound. GBPCAD has been choppy in recent weeks as the market scrambles to understand the impact s of COVID-19 and the implications for the global economy.
The price of Oil has dropped to an 18-year low, below $20 / barrel, which has put pressure on the Canadian currency as it relies on its exports of Oil as a major contributor to the economy. Lower demand can therefore negatively impact the Canadian economy and the lower price of Oil has done just that.
Sterling has been buoyed by recent improvements in global sentiment towards the Coronavirus, which financial markets more confident of the response by both central banks and governments. Whilst there is still much to do, the strong fightback has boosted markets and help lift the pound off its bottoms.
Where Next for GBPCAD Exchange Rates?
We are just at the early stages of this crisis so it is difficult to fully understand the full effects and what might lie ahead. The global economy is predicted to enter a very tough period and for the Canadian dollar, which relies on strong global demand for its raw materials like lumber and oil, the potential knock-on effects could be far ranging.
The Canadian dollar is also very closely correlated to the US economy, which could be under increasing pressure as the US has now overtaken China in the number of cases being reported. Canada has been responding to the threat, with a C$107bn package to improve confidence and provide a response.
With the Bank of Canada having also cut interest rates to 0.25%, there have been great efforts to shore up the Canadian economy. These measures combined with the price of Oil falling could trigger some further shifts on the rate, the big news ahead this week might be Friday, when we learn of the latest UK Services data, which represents 80% of the UK economy.
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