The pound sterling dates around 1300. It turned into its modern form after the decimal fraction in 1971. Currently, it is the fourth most traded currency in the foreign exchange market and represents a significant number of daily transactions throughout the world.
Back in the early 1850s, Canada began to move away from the colonial pound and switched to the Canadian decimal dollar. It is often called “Loonie”. The Canadian dollar was attached to the US dollar. Since 1970, it has been a freely floating currency controlled by the Bank of Canada.
A significant factor that affects the value of the pound sterling is the overall effectiveness of the UK economy. There are three reports of gross domestic product (GDP), which are published as follows; preliminary GDP, revised GDP and final GDP. Traders and investors would follow these reports, trying to determine the future movement in the market.
The monetary policy adopted by the Bank of England (BOE) also influences the price of the pound sterling. Whenever the Bank of England believes that inflation will grow too fast, it will use monetary policy tools to try to control growth. During this action, interest rates may rise, which is another factor that traders take into account when analyzing the market and possible future direction for the GBP-CAD pair.
Bank of Canada can be a major factor affecting the value of the Canadian dollar. It adopts a policy that aims to promote economic growth and employment growth, although it has not directly intervened in the currency since 1998.
Canada is a major exporter of materials and goods, such as: wood, grain, minerals, oil, etc. This is very often a factor in the steady growth of CAD exchange rates. Proximity to the United States has strengthened the import/export industry in Canada and helps the currency to maintain its position in the foreign exchange market.
You can trade a British pound/Canadian dollar (GBP/CAD) pair or trade with a Forex contract, or, alternatively, you can start trading a contract for difference (CFD) on the chosen currency pair and earn on the difference in price. This means that the trader chooses the market in which he wants to trade, but instead of making a complete physical purchase (or sale), opens the CFD with the selected broker. This contract will copy profits and losses from the intended purchase (or sale). CFDs, including the GBP/CAD pair, are growing rapidly in popularity as a flexible alternative to traditional stock trading, which provides more leverage for investment capital.
For example, to trade GBP/CAD with CFDs, you are analyzing the direction of the price of British pounds in CAD. If you think that the pound will grow, take a long position by buying CFDs. If you think that the pound will lose its value against the Canadian dollar, you would open a short position selling CFDs.
So, the GBP/CAD pair has high volatility and liquidity. The greatest dynamics of the GBP/CAD quotes are observed during the American and European sessions, during the Pacific session the volatility is much lower, and the movements of the pair are more stable.
When trading GBP/CAD, it is worth noting that the pair is influenced by changes in quotations of other currencies: the Canadian dollar exchange rate depends on the important economic factors of the neighboring state – the USA, GBP – on the EU indicators. Therefore, when preparing a forecast for GBP/CAD using fundamental analysis, it is necessary to take into account not only the economic indicators of the UK and Canada, but also the publication of data on the economy of the United States and eurozone countries.
In addition, the Canadian dollar is a commodity currency and depends on the value of oil on the world market. With a decrease in the price of oil quotes GBP/CAD grow. The GBP/CAD trading instrument is closely related to GBPUSD and EURUSD, especially during the European session.