The Pound to Canadian Dollar fell to a low of 1.65 on Monday as uncertainty surrounding the UK’s continued access to the EU single market following a Brexit weighed GBP down. While it recovered from its worst levels, sturdy demand for oil strengthened the Canadian Dollar during Tuesday’s session and GBP CAD headed back down towards 1.65.
Pound (GBP) Trade Weakened by Fresh Brexit Jitters
Sterling lacked the fresh stats or news needed to hold its ground on Monday.
Britain’s economic calendar has been quiet since markets opened for the week and will not see any influential reports until Wednesday’s public sector net borrowing figures – which already concern bearish traders. Forecasters predict borrowing will worsen to 11.6b in November, which is part of why Sterling performed poorly on Monday.
The Pound was also weakened as investors once again grew concerned about the possibility that Britain would completely lose access to the EU’s single market following the Brexit.
With Brexit still easily the longest underlying downside factor in GBP trade, markets are now worried by comments from EU leaders that they would only allow a Brexit transition period after the terms of a UK-EU divorce are settled.
Canadian Dollar (CAD) Kept Afloat by Sturdiness in Oil Prices
Demand for the Canadian Dollar started the week out limply, with last week’s Federal Reserve meeting still weighing on the appeal of risk-correlated currencies and assets.
The Fed hinted in last week’s meeting that it could hike US interest rates as much as three times throughout 2017. This hawkishness led to a risk-off movement in markets which left the Canadian Dollar weak despite recent excitement in the oil markets.
Last week saw OPEC’s oil output cap plan finally begin. Hopes are high that this will give prices of oil, Canada’s most lucrative commodity, a significant long-term boost which would also strengthen the oil-correlated ‘Loonie’.
As oil prices hovered over US$55 per barrel on Monday night and Tuesday, analysts begun to hope that prices would remain at these levels in order to support the oil market going forward.
Movement in oil prices was relatively light overall however, as investors unwound positions on the commodity for the holiday season.
GBP CAD Forecast: UK’s Public Sector Net Borrowing Results could Weaken Pound
The Pound to Canadian Dollar exchange rate could be in for a week of losses if its current trajectory continues in the coming days.
While the worst of Monday’s Brexit jitters have passed, the data in the coming days could weaken the Pound and make it increasingly difficult for GBP/CAD to hold its ground.
Wednesday will see the publication of Britain’s November public sector net borrowing results, which are expected to worsen from 4.3b to 11.6b.
If the UK government is revealed to have borrowed even more than this, traders will grow increasingly concerned about government spending throughout the Brexit process.
As for the Canadian Dollar, prices of oil could support the ‘Loonie’ for the remainder of the week if they remain above US$55 per barrel as analysts hope they will.
Domestic ecostats may also influence CAD movement if global factors like the Fed-influenced risk-off movement fade. Thursday will see the publication of November’s Consumer Price Index (CPI) results which are expected to have slowed slightly year-on-year.
Finally, Friday will see the publication of Britain’s Q3 Gross Domestic Product (GDP) results and Canada’s October ones, which could cause a bit more GBP CAD movement towards the end of the week even as trade quietens down for the holiday period.
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