GBP/CAD is bullish on Thursday, after three bearish sessions in a row. Currently, one British pound buys 1.7331 Canadian dollars, up 0.16% as of 10:00 AM UTC. The pair has been trading in the negative territory for most of the day, but it recently bounced back to break above 1.7300.
The price has found a strong support near 1.7270. It rebounded even though the Loonie is in a better position considering the fundamentals. Oil prices are surging amid hopes that the demand is reviving amid easing lockdown measures. Elsewhere the UK is not ready to lift restrictions, which doesn’t bode well for the pound.
UK Finance said that government-backed bank lending to small and medium-sized businesses affected by the coronavirus crisis increased to 4.1 billion pounds, up from 2.8 billion last week.
Previously, the Bank of England criticized British banks for the slow pace of lending under its Coronavirus Business Interruption Loan scheme. 80% of the plan is backed by the government, which recently launched a new scheme for the smallest companies.
US Pessimism Might Affect Canada
Another possible explanation for the sudden decline in the GBP/CAD pair is that investors have priced in the economic damage caused by the global pandemic. Canada is set to release its monthly GDP performance later today. The report will certainly discourage economists.
Yesterday, preliminary data from the US Bureau of Economic Analysis showed that the US economy tumbled by an annual rate of 4.8% in the first quarter of 2020. This is the first contraction since 2014 and the worst figure since 2008. Analysts expected a contraction of only 4.0%. Nevertheless, the reading might be revised and change significantly.
The US is Canada’s neighbor and largest trade partner. The decline in US GDP was driven by a drop in personal consumption. Companies across the US laid off workers amid the lockdown measures.
In the end, the Loonie might be supported by surging oil prices. At the time of writing, Brent has increased by over 9% while WTI has jumped over 17%. Investors hope that oil demand will increase. Also, the OPEC+ should start cutting production tomorrow.
