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The Canadian dollar surges as Middle East conflict sends GBP/CAD to its lowest in nearly a year.
A Canadian dollar rally breaks the bounds of a long-standing range in GBP/CAD.
The exchange rate broke lower in Monday trade as global markets factored in turmoil in the Middle East, reaching 1.8218 in early Asian trade.
That’s the lowest level in nearly a year, last seen in April 2025, and comes courtesy of the divergent fortunes posed to Canada and Britain by rising oil and gas prices.
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Oil prices jumped 7% on Monday, and natural gas prices surged to levels last seen after the Russian invasion of Ukraine, after the U.S. and Iran effectively went to war over the weekend.
Canada is a major oil producer and rising oil prices are naturally supportive of the country’s foreign exchange earning potential and the CAD is higher as a result.
By contrast, the UK is a net energy importer and is very vulnerable to another spike in oil and gas prices. One only needs to look at the significant inflationary impulse following the Russian invasion of Ukraine for a clue as to how damaging these spikes can be.
It’s little wonder then that GBP/CAD fell to its lowest level in nearly a year.
Pound Sterling Live
However, the pound has since recovered from earlier lows as markets look towards the U.S. offering Iran an offramp.
One consistent message we pick up in the mayhem of war coverage is that the U.S. wants Iran to come to the negotiating table, and we suspect President Donald Trump knows he will become very unpopular very fast in the event of another spike in inflation.
His problem is that his military did such a good job of eliminating the Iranian leadership that there’s not much of a senior team to negotiate with at this point, meaning Iran might be rudderless for some time and will keep fighting as a de facto response.
If so, then it would be too soon to fade the initial market reaction, and we suspect this leaves GBP/CAD vulnerable to further losses in the coming days.
