GBP/CAD is the ticker symbol for the British Pound to Canadian Dollar exchange rate on the Forex trading market. The British Pound/Canadian Dollar currency pair (GBP/CAD) tracks how much the GBP is worth against the CAD.
The GBP (also referred to as the pound) and the CAD (also known as the Loonie) are the official currencies of two top ranking global economies. While the GBP/CAD is regarded as a minor pair (as its liquidity cannot compare to USD quoted pairs), trading the pair during its peak market hours, i.e. London market hours, or between the hours of 8 am and 5 pm GMT can help traders make the most of its liquidity.
GBP/CAD Trading History
The GBP/CAD pair combines two currencies with significant roles in the global economy. The pound is the currency of the UK – a crucial center of global finance, the 4th most actively traded currency in the foreign exchange market, and one of the world’s major reserve currencies. Meanwhile, Canada is one of the world’s largest commodity exporters, as well as the wealthy northern neighbor of the world’s no.1 superpower – the United States of America.
Having its roots in continental Europe, the British pound’s name is derived from the Latin word “poundus” meaning “weight”, while the “£” symbol comes from an ornate “L” in Libra. The pound first became a unit of currency in 775AD in Anglo-Saxon England, and was equivalent to 1 pound weight of silver.
The Canadian dollar on the other hand, is a “younger” currency which originated in 1817 when the Bank of Montreal issued the first Canadian bank notes. The notes became the main means of payment in British North America.
Today, the pound to Canadian dollar (GBP/CAD) pair is made up by the fourth and sixth most traded currencies in the foreign exchange market, and is popular amongst veteran traders and newcomers alike.
GBP/CAD Trading – Highs and Lows
The GBP had its fair share of headwinds as a standalone currency starting World War I, when the British government was forced to devalue the pound considerably. A significant drop in the value of the pound also came with the outbreak of WWII which led the British government to peg the value of the pound to the dollar.
In 1985, international intervention to depreciate the dollar drove down the value of the pound against the CAD to its lowest rate to-date at 1.45CAD. In 1992, the GBP exited the Exchange Rate Mechanism causing another sharp decline in the value of the pound. In 2008, the Lehman Brothers demise triggered the global financial crisis pushing the GBP/CAD lower. The pair proceeded to recover to reach 2.10CAD by early 2016 but later tumbled anew after the UK voted to leave the EU.
Why Trade GBP/CAD?
While the GBP/CAD pair attracts less trading interest than other major currency pairs, such as the euro (EUR/USD) and yen (USD/JPY), it offers high liquidity during its peak trading hours, and can provide a number of trading opportunities. What is more, the loonie is a free-floating currency that is used by one of the most stable, wealthy, prosperous, and globalized nations on the planet. The Canadian dollar’s value is also closely correlated with Canada’s exports in oil, wood, and gold, which means that disruptions to energy and commodity markets can create volatility for the GBP/USD.
Major Data Influencing GBP/CAD
Here are some of the factors to look out for when trading the GBP/CAD:
· Central Bank Monetary Policy
When corresponding central banks like the BoE (Bank of England) or the Bank of Canada (Banque du Canada) make changes to their monetary policy, for example, by hiking key interest rates, this can disrupt demand for the GBP/CAD. Keeping an eye out for major Central Bank announcements that can affect the GBP/CAD pair can help traders better gauge the pair’s future performance.
· Commodity Markets and Supply Chain Disruptions
Price movements in commodity markets linked to Canada’s economy and exports, such as oil, timber, and gold are inextricably tied to the performance of the loonie and, by extension, the value of the GBP/CAD.
· Economic Data Releases
Economic releases including local CPI (inflation) data, employment data, gross domestic product (GDP), retails sales, purchasing managers index (PMI) and others can have a major impact on their respective currency’s price action. With Canada being one of the largest oil producers in the world, the weekly U.S. oil inventory report, can also have a particularly strong effect on GBP/CAD.
Geopolitical tensions such as trade wars, elections and even disruptions to oil production tend to introduce instability which reflects in the overall forex market. What is more, Canada is the USA’s closest neighbor and the UK is the USA’s biggest trading partner, so any US economic news will also quickly be reflected in the GBP/CAD.
Mainly, GBP/CAD currency pair is heavily affected by the correlation between the United Kingdom and Canada. As previously noted, the CAD is also positively correlated with rising oil and tinder prices, when oil prices move higher, the currency pair tends to drop as the CAD gains.
Day Trading the GBP/CAD Pair
The GBP/CAD forex pair offers traders a variety of short- and long-term opportunities – and while the forex market is open 24 hours a day, 5 days a week – the best times to trade the GBP/CAD are during London market hours, or between the hours of 8 am and 5 pm GMT.
GBP/CAD Volume and Volatility
As noted above, there are specific times when certain pairs are most volatile. Significant movement in the GBP/CAD usually occurs when the European trade session opens. This is between 08:00 to 17:00 GMT. However, volatility cab also be expected during UK and Canada economic data releases, which typically occur between 07:00 to 09:30 GMT for the UK, and 13:30 to 15:00 GMT for Canada. That being said, energy-related data releases, as well as breaking news announcements can trigger a flurry of trading activity for the GBP/CAD pair.