Why is the GBP/CAD an important market?
The pound to Canadian dollar (GBP to CAD) pair is the fourth and sixth most traded currencies in the foreign exchange market, representing a significant volume of daily trading. It's a currency pairing which is popular amongst veteran traders and newcomers alike.
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GBP/CAD trading hours
The forex market is available 24 hours a day, but UK trading, in particular, tends to get active from 8:00 AM and taper off from 5:00 PM. Of course, there will be times during the day when this currency pair experiences higher volumes - typically around major market announcements.
History of GBP/CAD
The pound sterling dates all the way back to around 775. It evolved into its current, modern form following decimalisation in 1971. Currently, it is the fourth most-traded currency across the foreign exchange market and represents a significant amount of daily trades all around the world.
Back in the early 1850s, Canada began its departure from the colonial pound and transitioned to a decimalised Canadian dollar. It’s often referred to as the ‘Loonie’. The Canadian dollar used to be pegged to the USD. Since 1970, it has been a free-floating currency controlled by the Bank of Canada. The British pound to CAD rate (GBP/CAD rate) has an interesting history, which you can see below.
Exchange rate pound to Candian dollar:
Factors influencing the GBP/CAD
Role of GBP
A significant factor which affects the value of GBP is the overall performance of the economy across the United Kingdom. There are three gross domestic product (GDP) reports which are released, as follows; Preliminary GDP, Revised GDP, and Final GDP. Traders and investors will follow these reports when trying to determine the future movement in the market.
The price of the pound sterling is also impacted by monetary policies enacted by the Bank of England (BOE). Whenever the BOE deem inflation to be rising too quickly it will utilise monetary policy tools to try to control the rise. During this action, interest rates can rise, which is another factor that traders consider when analysing the market and possible future direction for the GBP-CAD pairing.
Role of CAD
The Bank of Canada can be a major influencer of the value of the Canadian dollar. It enacts policies that try to promote economic and employment growth, although it hasn’t directly intervened in the currency since 1998.
Canada is a large exporter of materials and commodities, such as: wood, grain, minerals, petroleum etc. This is very often a factor in the stable growth of CAD rates. Being so close to the US has strengthened the import/export industry in Canada and helps the currency maintain a stronghold in the foreign exchange market.
How to trade the GBP/CAD CFDs
An individual can trade the British pound / Canadian dollar (GBP/CAD) pairing with either a forex contract or alternatively, they can trade a contract for difference (CFD) on a particular currency pair, and speculate on the price difference.
A CFD is a financial instrument, typically between a broker and an investor, where one party agrees to pay the other the difference in the value of a security, between the start and end of the trade. You can either hold a long position (speculating that the price will go up) or a short position (speculating that the price will fall). This is considered a short-term investment or trade as CFDs tend to be used within a limited timeframe.
Trade British Pound / Canadian dollar CFD
For instance, to trade the GBP/CAD currency pair using CFDs, you speculate on the direction of the value of British pounds to CAD. If you think the pound Sterling will rise then take a long position by buying the CFDs. If you think the pound will lose value versus the Canadian dollar then you would take a short position by selling CFDs.
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Trading on margin: providing trading on margin (20:1 for GBP/CAD), Capital.com gives you access to the GBP/CAD pair using CFDs.
Trading the difference: by trading CFDs on GBP/CAD, you speculate on the rise or fall of its price. CFDs trading is no different from traditional trading in terms of its associated strategies. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with their objectives.
All-round trading analysis: the browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. For instance, a trader could choose to have GBP/CAD analysis and GBP/CAD forecasts as a big part of their feed. Capital.com provides live market updates and various chart formats, available on desktop, iOS, and Android.
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For somebody new to the world of the foreign exchange market, it can seem like an intimidating place. However, once you've grasped the basics, trading on Forex is actually quite similar to other markets. There are just a few key differences.
Because there is no central exchange and it is a market driven by the world’s large financial institutions, the volumes can be huge in comparison to other markets. Not only does this lower the overall cost to traders but it also makes entering and exiting trades easy.
This one occasionally trips up newcomers, but it's quite possibly the simplest answer of the lot. A pip is merely the smallest increment of trade in the foreign exchange market. It stands for 'percentage in point.' GBP/CAD is quoted to four decimal points, so a pip is just the lowest amount that can possibly be added to (or subtracted from) this figure.