GBP/CAD Signals & Technical Analysis
About the GBP/CAD (British pound sterling and Canadian dollar)
The GBP/CAD pair is the abbreviated term used for the Great British Pound and Canadian dollar. This pair does not have a nickname. Before we get into the particulars, what exactly does GBP/CAD rate mean? The exchange rate tells you how many Canadian dollars (the quote currency) are required to purchase one Pound (base currency). For example, if the pair is trading at 1.65, it means it takes1.65 Canadian dollars to buy 1 pound.
Breaking Down ‘GBP/CAD’
The pound sterling (symbol: £; code: GBP), commonly known as the pound and less commonly referred to as sterling is the official currency of the United Kingdom. Previously, the pound sterling was commodity money or bank notes backed by silver or gold, but it is currently Fiat money, backed only by the use of as little as possible in the areas where it is taken. The pound sterling is the world's oldest money still in use, which has been used in unbroken stretch use since the start.
Whereas, the Canadian dollar is also classified as a commodity currency, as it exhibits a correlation to the energy products' crude oil and natural gas. Since the pound is a first currency (base currency) and the Canadian dollar is a second currency (the quote currency), the pair is called a cross-currency pair.
GBP/CAD is a currency pair from the category of cross-rates, which consists of the British pound sterling (GBP) - the official payment unit of Great Britain, and the Canadian dollar (CAD) - the national currency of Canada. This pair has high volatility and liquidity.
Correlation is merely a mutual relationship or connection between two or more things.
Positive correlation – The positive relationship merely is when pairs move in tandem with each other. In the forex world, GBP/CAD - GBP/SGD, GBP/CAD - EUR/GBP, and GBP/CAD - GBP/USD currency pairs are positively correlated.
In contrast, a negative relationship is when forex pairs move in the opposite direction, For example, GBP/CAD - EUR/GBP, GBP/CAD - EUR/SGD, and GBP/CAD - CHF/SGD.
Crude Oil & Loonie: Typically, the price of crude oil has been highly correlated with the Loonie. Therefore, a rise in crude oil prices increases the value of the Canadian dollar and vice versa.
What Determines the GBP/CAD Exchange Rate?
Several factors can impact the GBP/CAD rate valuation, including:
At the BOE front, the Bank of England (BoE) is the central bank of the United Kingdom. It has a broad range of duties and responsibilities as well, comparable to those of most central banks around the world. It acts as the government's bank and the lender of last resort. It issues currency and, most importantly, it oversees monetary policy.
At the BOC front, the Bank of Canada was founded in 1934 under the Bank of Canada Act. The Act stated that the Bank of Canada was founded to promote the economic and financial welfare of Canada. The BOC and its Governor are liable for handling the monetary policies, printing money and managing the Canadian bank's interest rates.
The movement in Great Britain Pound and Candian Dollar economic events determine the exchange rates. Top of the line economic events include GDP, Employment Change, Industrial Production, and Consumer Price Index. Better than forecast data increases the demand for related currency and impacts the value of either the Great British Pound or the Polish złoty, causing fluctuations in the GBP/CAD exchange rate.
Major Economic Events:
Gross Domestic Product – The Gross domestic product is the central measure of economic growth in the region.
Employment Change – Both currencies are sensitive to changes in employment, as slacks in the labor market cause a drop in Inflation rates.
Consumer Price Index – Since one of the goals of the BOE and BOC is to maintain price stability, they keep an eye on inflation indicators such as the CPI. If the annual CPI deviates from the central bank’s target, the BOC or the BOE could make use of their monetary policy tools to keep inflation in check.
The balance of Trade – Canada has an extremely robust trade sector, so currency traders and bank officials alike tend to watch changes in the country’s export and import levels.
Political announcements & natural disasters – Besides the scheduled economic events, political elections, new systems, wars, terror incidents, natural calamities, etc. can all cause severe variations within GBP/CAD.
The GBP/CAD is traded in amounts denominated in the Poland złoty. Standard lot Size: 100,000 Mini lot size: 10,000 One pip in decimals 0.0001 Pip Value: $7.55