Crude Oil demand driving GBP/CAD exchange rates

Today we have seen the GBP/CAD exchange rates rise almost a point from around 1.8350 to 1.8440, despite there only being some minor data out from either side of the cross today. In today’s report we will look at what has caused these movements and where the exchange rates may be heading next.

Crude Oil moving the GBP/CAD exchange rates

As far as Canada and the UK are concerned, the only data releases of note today were RMPI (raw materials price index) and IPPI (industrial product price index) from Canada. These came out just above and just below the forecasts and cancelled each other out as a result, leaving the exchange rates fairly flat.

So what caused the exchange rates to rise? This movement was largely down to news from outside Canada and the UK. It was shortly after the Canadian data releases we had news from the US in the form of Crude Oil Inventories. This shows the change in number of barrels of Crude oil held by commercial firms. The reason this is so important for the strength of the Loonie is that the Canadian economy is very much commodities based. Oil being the commodity in question and the US accounting for the vast majority of their business. The more oil US companies hold, the more funds are coming into the country and the Canadian dollar strengthens accordingly.

Today however the figures missed expectations by some margin. It was expected that there would be a small contraction of around 0.5M but when the actual numbers were released at -3.7m, the Canadian Dollar weakened and the GBP/CAD exchange rates rose dramatically, making it cheaper to buy the Canadian Dollar.

Where are the exchange rates heading next?

Tomorrow we will see the most important data release of the week for the Sterling to Canadian Dollar cross. This is when we will see the latest Canadian GDP figures. These show the change in value of all goods and services produced by the economy and is the broadest measure of economic activity and one of the best gauges for economic health. If these figures fail to reach their targets we could see the exchange rates rise further, pushing them near to the highest levels since 2008.

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