The GBPCAD currency pair is a combination of the Great British Pound, or GBP, and The Canadian Dollar, or CAD. The GBP is the national currency for the UK while the CAD is the national currency for Canada. The GBP is the fifth most traded currency in the world while the CAD is the sixth most traded currency in the world. Together, the GBPCAD is the sixth most popular currency pair in the world. Both their nations are ruled by the royal family. They are both among the most developed countries in the world and are therefore a part of the G8. Since they don’t contain the USD, they’re also known as a cross-currency pair. Since they have a low trading volume, they’re also known as a minor currency pair. Let’s dig into how they function as individuals before we get into the good stuff.
The Great British Pound
The British Pound is the official currency of the United Kingdom and its Dependent Territories. It is the world’s fifth most used currency in terms of volume. It is also the world’s oldest form of payment and is commonly referred to as the “Quid” among locals. It is still one of the most important currencies in the world today.
The pound was acknowledged as equivalent to 1lb of silver as early as 775AD. Following England’s defeat against France in 1694, the newly founded Bank of England began printing Pound notes, which quickly became globally known. The Bank of England is in charge of creating this valuable form of payment. In the early 18th century, the value of the pound was linked to gold weight rather than silver weight. However, in order to finance its war expenses during World War I, the government discontinued the use of gold as a method of payment. It briefly reverted to the gold standard after the war, but the outbreak of World War II forced the country’s currency to be fixed. It only became free-floating again after the 1970s.
The Canadian Dollar
The Canadian dollar is the national currency of Canada, the maple country. The Canadian Dollar is the sixth most used currency in terms of the trading volume. Canada has used the Canadian Pound as its currency since 1841. This occurred during the British Empire’s rule. The United States, on the other hand, quickly became the most preferred currency, and the USD quickly surpassed all other currencies. In order to enhance ties with the United States, Canada established the Canadian Dollar as its national currency in 1858.
The Bank of Canada is in charge of producing CAD notes. Canadians are well-known for their humor and the liveliness that they bring to the English language. They frequently use the same term to refer to their paper notes. The $1 note is commonly referred to as a ‘Loonie,’ while the $2 note is referred to as a ‘Toonie.’
Why Trade GBPCAD
Both the UK and Canada are ruled by the British royal family. Despite this, they have their own currencies and their own currency correlations. Here are the top reasons to trade the GBPCAD currency pair:
One of the most compelling reasons to trade the GBPCAD pair is that it is a cross-currency. As a result, they may greatly contribute to the diversification of your asset portfolio. Trading a currency pair that includes the USD presents a number of complications. In business, the most commonly utilized currency is the US dollar. As a result, when there is an inconvenience, it suffers the greatest. Any significant economic event that occurs anywhere in the globe has a direct influence on the value of the USD. As a result, the majority of the time, every dollar currency pair will face unfavorable trading circumstances. To reduce market volatility, some traders prefer trading currencies that do not include the USD. The GBPCAD is an excellent illustration of this sort of currency. The GBP and CAD are two of the most widely used currencies in the world.
Identifying market conditions for GBPCAD appears to be rather convenient. This is owing to the fact that changes in their respective nations, namely the United Kingdom and Canada, have the greatest impact on them. Because the USD is the main currency for worldwide commerce, any changes anywhere in the globe would affect a pair that included the USD. Similarly, any changes in any of the European Union’s 28 member countries would have an effect on a pair including the Euro. As a result, it becomes impossible to keep track of every place that may have an influence on a currency pair. Currency pairs that are strictly related to a certain region, such as GBPCAD, are significantly easier to predict since we just need to measure the economic developments in their own countries.
The connections between forex pairs such as the GBPCAD and other assets in the market are compelling reasons to trade them. This is shown in the example of the British Pound, which has strong linkages with commodities like electrical machinery and transportation. These are the country’s most popular exports. It is especially noticeable in the case of the Canadian Dollar, which has significant ties to commodities such as gold and crude oil.
This is because they are involved in the exporting of these expensive goods. As a result, trading this pair becomes much easier since if we understand the direction of the commodities market, we can easily comprehend the direction of the GBPCAD market. Later, we’ll look through how these commodities will impact the movement of the GBPCAD currency pair in further depth.
GBPCAD Trading Tips
As we’ve mentioned previously, the GBPCAD are two different currencies that are being controlled by the same royal family. As a result, it presents some unique market conditions. In order to properly trade in these market conditions, there are trading strategies meant specifically for this currency pair. Following are some top trading tips for GBPCAD:
Just because the forex markets are open 24 hours a day, 5 days a week, does not mean all currency pairs should be traded round the clock. Currency pairs like the GBPCAD are most active during the European session. This is between 8 am and 5 pm GMT. However, most UK data is released between 7 am and 9:30 am GMT while most Canadian data is released between 1:30 pm and 3 pm GMT. Therefore, you should keep these timings in mind when trading the GBPCAD currency pair.
Day trading is a trading approach in which a trade is opened and closed on the same day. Before the market stops, all deals, whether profitable or not, must be finalized. Scalping is a popular trading approach for this trading strategy. Traders would open a BUY and SELL position at the same rate for the same currency pair. This allows them to benefit regardless of how the market swings. They profit from the alternative position they take when the market declines. This method is ideal for the GBPCAD since this volatile pair may be rather unstable at times. Day trading, more especially scalping, is an effective approach for collecting gains between altering market circumstances during periods of volatility.
Range trading is the process of determining when to join a trade by evaluating support and resistance levels. The resistance levels are represented by the highest points on a given chart. Similarly, the lowest points on a specific chart signify levels of support. Understanding where these highs and lows are located is crucial to the range trading strategy. For example, if the price is reaching a resistance level and you feel it will hold, you might enter a SELL order. This is also referred to as cutting it short. Similarly, if the price reaches a level of support that you feel will hold, you may place a BUY order. Going long is another term for doing this.
Factors Affecting GBPCAD
Both the UK and Canada are very different countries in all aspects including regions and correlations. Due to this, they present some very unique circumstances when traded as a currency pair. Here are the top factors affecting GBPCAD:
The Gold Industry
Canada is one of the world’s leading exporters of gold and other precious metals. Any changes in demand for this commodity have a significant impact on the value of Canada’s economy. If global demand for gold rises, Canada will be able to export it more frequently, increasing the value of the Canadian dollar.
As a result, the value of GBPCAD would fall. Asian wedding seasons are the finest illustration of when gold demand often skyrockets. Similarly, if global demand for gold declines, Canada will be unable to export as much as normal, causing the CAD to fall in value. As a result, the value of GBPCAD would rise.
The Electrical Machinery Industry
The United Kingdom is a major supplier of electrical machinery. As a result, its economy is heavily reliant on global demand for these items. Any changes in the demand for electrical machinery will have an immediate influence on the value of the pound. If demand for electrical machinery falls, the UK will not export as many of them, leading the GBP to depreciate. This would cause GBPCAD to fall in value. Similarly, when global demand for electrical machinery grows, the UK will export more of it, and the value of the GBP will appreciate. This would cause GBPCAD to rise in value.
The Crude Oil Industry
Canada is one of the world’s top crude oil exporters. Any changes in demand for this commodity have a significant impact on the value of Canada’s economy. If global demand for crude oil rises, Canada will be able to export it more often, increasing the value of the Canadian dollar.
As a result, the value of GBPCAD would fall. Similarly, if global demand for crude oil drops, Canada will be unable to export as much as normal, causing the CAD to fall in value. As a result, the value of GBPCAD would rise.
The Transport Industry
The United Kingdom is a major exporter of cars and car parts. As a result, its economy is highly reliant on global demand for these items. Any changes in demand for transportation vehicles will have an immediate influence on the value of the pound. If demand for vehicles falls, the UK will not export as many of them, leading the value of the GBP to fall. This would also cause GBPCAD to fall. Similarly, if global demand for vehicles rises, the UK will export them more frequently, and the value of the GBP will rise. This would cause GBPCAD to also rise.
The Bank of England and the Bank of Canada are both accountable for any volatility in the GBPCAD market. The BOE and BOC issue monthly reports and remarks about policy adjustments. These assessments also provide economic and monetary projections for the near future. Any favorable BOE outcomes will have a positive influence on the GBPCAD currency pair. Any favorable BOC outcomes, on the other hand, will have an adverse influence on the GBPCAD currency pair. Representatives from these specific banks also give presentations on a regular basis in which they discuss these outcomes in further depth. These remarks are just as crucial, if not more, in influencing the direction of the GBPCAD market. Andrew Bailey, the Governor of the BOE, is well-known for his remarks. Sharon Kozicki, the Deputy Governor of the BOC, is well-known for her remarks.
Gross Domestic Product
GDP, or Gross Domestic Product, has an enormous influence in the volatility of this minor currency pair. GDP is a measure of a country’s overall economic performance. A positive GDP statistic shows that the economy is thriving. This, in turn, would encourage individuals to invest in the country’s economy, raising the value of the currency. If the UK’s GDP improves, the GBP will climb in value, leading the GBPCAD to grow in value as well. The opposite is true in the case of CAD. If Canada reported a good GDP, the CAD would appreciate, forcing the GBPCAD to depreciate.
Most common questions asked by the forex traders about GBPCAD:
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