GBP/CAD is departing from its lowest level since October last year. Currently, GBP/CAD is trading at 1.6934, up 0.50% as of 11:23 AM UTC, after losing over 2% during the previous two sessions. At the beginning of this month, the pair touched the highest since April 2018, but it has tumbled over 7% since then. The pound has weakened against the Canadian dollar even though oil prices crashed over 50% from their monthly peaks, putting pressure on the Loonie.
Yesterday, the Canadian dollar stood firm as the annual inflation dropped only to 2.2% last month, while analysts expected a decline to 2.1%. However, some economists argue that it is hardly likely that the consumer prices index (CPI) will manage to stay close to the central bank’s 2% target considering the coronavirus pandemic. In January, the CPI rose to 2.4%.
Doug Porter, chief economist at BMO, said in a note to clients:
“Canadian inflation trends were essentially right on target just before the (corona) virus intruded. This will almost certainly be the last time we will see 2% inflation for an extended period of time. In that environment, the Bank of Canada has a free hand to do what it takes to support the economy.”
Besides the COVID-19 outbreak, the Canadian economy has also been hurt by tumbling oil prices after Saudi Arabia escalated a price war against Russia by cutting prices and increasing production.
The Loonie has lost some ground against the pound after US President Donald Trump tweeted that the US-Canada border will be closed to nonessential traffic. However, the move won’t affect trade, and it’s implemented by mutual agreement.
“We will be, by mutual consent, temporarily closing our Northern Border with Canada to non-essential traffic. Trade will not be affected,” Trump said.
The pound managed to recover some of the previous losses despite the fact that the number of infections in the UK surged in the last 24 hours by 676, with the death toll exceeding the 100 mark. Nevertheless, the British government doesn’t plan to implement travel restrictions for London for now. Prime Minister Boris Johnson’s spokesman stated earlier today:
“There is zero prospect of any restriction being placed on travelling in or out of London.”