Historical background of GBP/CAD
According to some sources, the term “sterling” appeared from about 775, according to others – from 1300, and some sources believe that the name appeared in the XII century. It became a modern form after the decimal in 1971. Currently, it is one of the most traded currencies in the financial market and represents a significant number of daily transactions around the world. In the early 1950s, Canada began to move away from the colonial pound and switched to the Canadian decimal dollar. It is often called “Looney.” For some time, the Canadian dollar was dependent on the US dollar. Also, since 1970, it is a free-floating currency controlled by the Central Bank of Canada.
What factors affect GBP/CAD
A critical factor in the value of the British pound is the overall efficiency of the UK economy. There are three reports on the gross domestic product (GDP), published as preliminary GDP reporting, a revised and final report. Traders and investors will follow these reports and try to determine the future movement of the market.
The monetary policy pursued by the Bank of England (BOE) also affects the pound. If the Bank of England believes that inflation will grow too fast, it will use monetary policy instruments to control growth. During this action, interest rates may increase, which is another factor that traders take into account when analyzing the market and the possible future direction for the GBP/CAD pair. The Bank of Canada could be an important factor affecting the value of the Canadian dollar. He took measures to accelerate economic growth and employment growth, although he has not intervened directly in the currency since 1998. Canada is a significant exporter of materials and goods such as wood, wheat, minerals, oil, etc. This is often a factor in the steady rise in CAD prices. Proximity to the United States has strengthened the Canadian import/export industry and helps the currency maintain its position in the foreign exchange market.
How to trade CFD in GBP/CAD
You can trade a pair of British Pound/Canadian Dollar (GBP/CAD) or a Forex contract, or you can start trading a CFD on a selected currency pair and earn a difference in value. This means that the trader chooses the market in which he wants to trade, but instead of a full physical purchase (or sale) opens a CFD with the selected broker. This contract will copy profits and losses from the proposed purchase (or sale). CFDs, including the GBP/CAD pair, are overgrowing in popularity as a flexible alternative to traditional stock trading, which provides more advantage for investment capital.
For example, to trade a GBP/CAD currency pair using CFDs, you are thinking of diverting the value of British pounds to CAD. If you feel that the pound will increase, take a great strategy by buying CFDs. If you think the pound will lose its value against the Canadian dollar, you will start acting on a short plan by selling CFDs. Therefore, the GBP/CAD pair has high volatility and is characterized by high activity and trading volume. The most significant change in GBP/CAD quotes is observed at the time the American and European sessions open, during the Pacific session, the volatility is much lower, and the pair’s movements are more stable. During the GBP/CAD bidding, it is worth noting that the pair is affected by changes in other currencies: the Canadian dollar exchange rate depends on the economic events of the neighboring country – the USA, GBP – on the EU indicators. Therefore, when preparing a forecast for GBP/CAD using fundamental analysis, one should keep in mind not only the economic news of Great Britain and Canada but also data on the economy of the USA and the countries of the Eurozone. Also, the Canadian dollar acts as a commodity currency and depends on the cost of oil in the world market. With the fall in oil prices, GBP/CAD is growing. The GBP/CAD trading tool is closely related to GBPUSD and EURUSD, especially in the European session.