The pound to Canadian dollar exchange interbank exchange rate was higher this morning by 0.63%. While the pound is stronger this morning against a number of its counterparts, there are 3 main reasons why we might see the value of the pound fall.
Firstly, the UK has a current account deficit as a result of importing more than it exports. Also the pound has been propped up by significant capital inflows from investors abroad attracted to UK investments. If these inflows start to dry up with the current uncertainty, it could put downward pressure on the value of the pound.
Secondly, the UK has a large banking sector and presence and is exposed at times of a credit crunch and uncertainty in the global banking system. Again, another reason we could see the pound to Canadian dollar forecast to come in lower.
Lastly, Brexit still overshadows the UK and pound. This as a result has made the UK not as attractive as it once was and has lost some of its appeal as a major currency reserve. While Brexit has been put aside for the moment, the June deadline for the European Union and UK to agree a deal is only a couple of months away that could see the pound to dollar forecast lower.
Canada approve stimulus package
The Canadian dollar was supported yesterday, when legislators in Canada approved a stimulus package to help ease the economic impact of the Coronavirus pandemic.
Canada announced a C$27bn aid package, that will give people affected C$2,000 a month and delay student loan repayments together with further measures. Canada is another country doing whatever it takes to beat the pandemic, their federal debt compared to GDP is relatively low at 31% compared to a number of other G7 countries.
Is GBP/CAD forecast lower or higher?
Canada is an exporter of commodities including oil. Given oil has seen a slump in prices recently, we might see that the Canadian dollar comes under pressure as the growing pressure on the oil industry mounts. This could see the pound to Canadian dollar exchange rate move in an upward direction if this is the case and see weakness on the Canadian dollar as a result.
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