The Canadian dollar gained against sterling on Tuesday as renewed US-Iran hostilities pushed oil prices higher, boosting demand for the commodity-linked currency.
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GBP/CAD falls 0.2% to 1.8603 as oil rally lifts Canadian dollar
The Canadian dollar gained against sterling on Tuesday as renewed US-Iran hostilities pushed oil prices higher, boosting demand for the commodity-linked currency.
GBP/CAD fell 0.2% to CA$1.8603 after oil prices surged on US military strikes in Iran, boosting the commodity-linked loonie. The pair touched 1.85799 before stabilizing, extending a volatile period after last week's firming.
"The renewed uncertainty prompted oil prices to recover some of their recent losses, which reflected positively on the Canadian dollar," according to market commentary from Exchange Rates UK Research. The US launched fresh strikes on Iranian targets near the Strait of Hormuz, shaking optimism over a potential agreement to safeguard shipping routes through the waterway.
Brent crude surged 4% on Tuesday before settling back to $98.16 a barrel on Wednesday, down $1.42. WTI crude traded at $92.23, losing $1.66. Tehran warned it reserved the right to retaliate, raising fears of further escalation. USD/CAD traded at 1.38126, while EUR/CAD stood at 1.60782. The jump reversed last week's decline, when Brent had retreated from above $110 to near $102 as diplomatic hopes improved.
The move extends a volatile period for GBP/CAD, which had firmed last week as oil prices softened and Canadian inflation came in below expectations. With both UK and Canadian economic calendars light through midweek, oil price direction remains the primary catalyst for the pair. Any further escalation could push crude higher and strengthen the loonie further, while diplomatic progress may reverse the move.
Sterling adrift without domestic catalysts
The pound struggled for direction with no major UK data releases to provide momentum. UK bond yields stabilized after initial declines, while political headlines from Westminster remained limited compared with the volatility seen in previous weeks. Sterling traded rangebound against most major currencies.
Canadian GDP data on deck
Canada's first-quarter GDP report due later this week is the next major test for the loonie. Economists forecast a modest 0.1% expansion, while monthly data for April is expected to show a slight contraction. A weaker reading could reinforce expectations that the Bank of Canada will remain cautious on monetary policy, potentially weighing on the Canadian dollar.
This article is for informational purposes only and does not constitute investment advice.
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