CAD Lifted As Oil Rises Above $100

The Pound-Canadian Dollar x-rate could remain under pressure if UK GDP stalls, while oil above $100 may keep the Loonie supported.

The Pound to Canadian Dollar (GBP/CAD) exchange rate was subdued on Wednesday amid a fresh rise in global oil prices.

At the time of writing, the GBP/CAD exchange rate was trading at CA$1.8658. Little changed from the start of Wednesday’s session.

DAILY RECAP:

The Canadian Dollar (CAD) edged higher on Wednesday, with the commodity-linked currency benefiting from a further rise in global oil prices as tensions in the Middle East escalated.

Brent crude – the global benchmark for oil prices – pushed above $100 a barrel on Wednesday for the first time since July.

The latest jump in oil prices followed US strikes on five Iranian oil tankers, sinking one of the ships, in retaliation against reported attempts by Iranian forces to attack a US warship.

However, the upside potential of the ‘Loonie’ remained limited on Wednesday amid ongoing concerns about Canada’s trade war with the US and its impact on the Canadian economy.

Canadian Prime Minister Mark Carney warned on Tuesday, as Canadian counter-tariffs against the US came into effect, that the pivot away from its largest trading partner ‘will come at a cost’.

The Pound (GBP) struggled to attract support on Wednesday as rising energy prices stoked UK inflation concerns.

UK gas prices have climbed to their highest level in around three and a half years as the conflict in the Middle East drags on.

While growing inflationary pressures increase the odds of the Bank of England (BoE) delivering an interest rate by the end of the year, GBP investors remain concerned that a fresh cost-of-living crisis could suppress consumer spending and choke off growth in the coming months.

Near-Term GBP/CAD Forecast: Stalling UK GDP to Weigh on Sterling?

Turning to the second half of the week, the next notable catalyst of movement for the Pound to Canadian Dollar (CAD/USD) exchange rate will be the publication of the UK’s latest GDP figures.

Friday’s data is forecast to show month-on-month UK economic growth flatlined in July, with the weak start to the third quarter likely to expose Sterling to fresh losses at the end of the week.

In the meantime, movement in the Canadian Dollar is likely to remain closely tied to oil price dynamics, with the ‘Loonie’ likely to continue to catch bids if crude prices continue to push higher.

Our currency coverage draws on live market data, official economic releases and published bank research.