GBP/CAD at Risk of 1.80 in Coming Days

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The pound is sliding against the Canadian dollar and a test of 1.80 could come this week.

The pound fell out of bed against the Canadian dollar on Monday and is vulnerable to losses in the coming week.

GBP/CAD gapped lower at the start of Monday trade to reach a near-one-year low at 1.8021, before retracing some of that loss to 1.8150. The pair closed Friday at 1.8190.

The pair's nose is firmly pointing lower and elevated oil and gas prices could well see a test of 1.80 before the week is out.

A global energy crisis is brewing due to a surge in global gas and oil prices as traders worry the Iran conflict will keep Middle Eastern supplies offline for an extended period.

Sure, there have been wars in the Middle East before, but what's peculiar to this war is that the Strait of Hormuz is almost completely shut and it's hard to see when it will open again. That's a massive choke of fuel supply to the global economy.

In currency land, we're in a world of energy exporters vs. energy importers, a dichotomy that splices GBP/CAD in favour of CAD.

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In 2023, Canada was the world's fourth-largest petroleum producer, with industry data showing the energy sector accounts for close 14% of the country's GDP. To be sure, Canadians will feel the price of higher prices, but the country's exporters will benefit, and this will bolster foreign currency earnings.

For GBP, there are few positives of higher energy prices as Britain has shuttered its natural gas and oil extraction industries and refining capacity in favour of wind and solar. For a country with a significant current account deficit, the crisis is proving to be an outright negative for the currency.