Pound Canadian Dollar Rate Narrows As Oil Price Fall Drags CAD – Exchange Rates UK

The Pound Canadian Dollar (GBP/CAD) exchange rate narrowed on Wednesday, as sharp falls in oil prices dragged down the oil-linked Canadian Dollar.
At the time of writing, GBP/CAD was trading at CA$1.65862, showing little movement from Wednesday’s opening rates.
The Canadian Dollar (CAD) slumped on Wednesday as oil prices fell below levels not seen since the start of the Ukraine-Russia conflict.
The oil-linked ‘Loonie’ was particularly vulnerable to this drop due to how much the Canadian economy is based on exporting oil. At the time of writing, Brent was trading at around $79 per barrel, while crude was at $74.
The slumping prices served to nullify the Bank of Canada’s (BoC) latest interest rate decision, which came in inline with market expectations. However, the BoC reaffirmed their intention to keep trying to bring down inflation, which may have cushioned CAD.
The Pound (GBP) strengthened on Wednesday, as UK Prime Minster Rishi Sunak and US President Joe Biden struck a deal to increase liquified natural gas (LNG) exports to the UK by over 50%.
The deal was struck as a means to aid the UK in avoiding an energy crisis over the comings months. While the UK is not heavily reliant on Russian energy exports, the spiking prices for European energy have had a knock on effect on UK energy prices. With this deal, the UK may be able to tackle the crisis head on, bringing optimism to GBP investors.
However, general market volatility may have weighed on GBP, and capped potential gains. Investor risk appetite has largely moved in narrow boundaries. With Sterling being an increasingly risk-sensitive currency, firmly risk-on trade may have brought tailwinds.
Looking ahead for the Pound, a lack of macroeconomic data may lead investors to focus on domestic headlines. With the UK continuing to endure a recession and cost-of-living crisis, any further headlines reflecting the impact these are having on households and businesses may weaken GBP against most peers.
However, with optimism abound over the Northern Ireland Protocol, positive developments on this front could bring support to Sterling. With the protocol remaining a thorn in the side of many recent UK Prime Ministers, positive developments will be welcomed by investors.
For the Canadian Dollar, the core catalyst of movement is likely to come from oil price changes. With Canada also lacking in macroeconomic data through to the end of the week, the oil-linked ‘Loonie’ may trade at the behest of oil prices. Should oil continue to fall, CAD may fall in tandem.


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