Pound Canadian Dollar Exchange Rate News: GBP/CAD Wavered on Rocky UK Domestic Woes

August 18, 2022 - Written by John Cameron

STORY LINK Pound Canadian Dollar Exchange Rate News: GBP/CAD Wavered on Rocky UK Domestic Woes

Pound (GBP) Undermined by Growing Domestic Chaos

The Pound (GBP) struggled for demand on Thursday as a myriad of headwinds kept Sterling under pressure.

Despite interest rate hike bets bolstered by fresh 40-year high inflation, the cost-of-living crisis continues to dominate headlines amid fresh domestic woes. Expectations of energy bills soaring by 80% have concerned experts who believe two-thirds of UK households will be plunged into fuel poverty by the beginning of next year. An estimated 45million people will struggle to pay their bill when the energy cap is set to increase in the winter.

Asda Chairman Stuart Rose, has called on the government to take stronger action:

‘We have been very, very slow in recognising this train coming down the tunnel and it’s run quite a lot of people over and we now have to deal with the aftermath.’

‘We are sitting here now into the second, third, fourth month into this crisis and we’re still waiting to see what action will be taken. I would like to see us looking after those who need it most.’

Meanwhile, social unrest continues to weigh on both the UK economy and the Pound as further strikes bring the UK’s railway systems to a standstill. Mick Lynch, RMT General Secretary, has warned that strikes could go on ‘indefinitely’, and that the UK is edging closer to a general strike:

‘There is a wave of reaction amongst working people to the way they’re being treated. People are getting poorer every day of the week. People can’t pay their bills.

‘They’re getting treated despicably at the workplace. I think there will be generalised and synchronised action. It may not be in a traditional form.’

Canadian Dollar (CAD) Wavers amid Climbing Oil Prices

The Canadian Dollar (CAD) failed to find a clear direction as climbing oil prices was offset by rising geopolitical tensions, lending support to rising global risk sentiment.

Lending some modest support to the Canadian Dollar on Thursday is the climbing price of oil as it looks to rebound from six-month lows. Analysts at Danske Bank is expecting a strong recovery for crude as it looks to keep above $100 a barrel for the rest of the year before slipping in the new year:

‘A stronger USD, weaker global economy and potential for new suppliers to come to the market and reap the benefit from higher oil prices are the main factors behind our projection.’

Meanwhile, tensions remain fraught between China and the US over the latter’s insistence on cementing diplomatic ties with Taiwan, much to the chagrin of China. The US hopes to deepen trade and investment relationships with Taiwan. The Deputy United States Trade Representative Sarah Bianchi said:

‘(The US-Taiwan relationship will) advance mutual trade priorities based on shared values and promote innovation and inclusive economic growth for our workers and businesses.’

As expected, China reacted with reduced enthusiasm for the burgeoning relationship, as the Chinese Commerce Ministry issued a statement condemning such actions:

‘China resolutely opposes the US and Taiwan to start trade talks under the new initiative. (We) will take all necessary measures to firmly safeguard its sovereignty, security and development interests.’

Continuing geopolitical tensions could have an adverse effect on global market sentiment, and in turn could hamper the ‘Loonie’.

GBP/CAD Exchange Rate Forecast: Canadian PPI to Hinder the Loonie?

Looking ahead to the rest of the session, the Canadian Dollar could come under pressure if PPI data prints to forecast. A second consecutive fall in producer prices could highlight the struggling global economy as supply chain issues and demand remain subdued.

Meanwhile, ongoing domestic troubles will likely keep pressure on the Pound as markets look ahead to Friday’s retail sales.

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TAGS: Pound Canadian Dollar Forecasts