Upbeat Post-Brexit Economic Outlook Bolsters Pound Canadian Dollar (GBP/CAD) Exchange Rate
The Pound Canadian Dollar (GBP/CAD) exchange rate could be set to rally in the long-term if former Treasury Minister Lord O’Neill’s Brexit outlook proves accurate.
Lord O’Neil has asserted that downcast expectations regarding the impact of Brexit are liable to be ‘dwarfed’ by a run of more positive figures – claiming that he may have been too pessimistic in his initial assessments.
The former minister cited global growth, improving productivity and rebalanced government policies that focus on Northern England as important factors for fostering resilience within Britain’s economy, stating:
‘I certainly wouldn’t have thought the UK economy would be as robust as it currently seems. That is because some parts of the country, led by the North West, are actually doing way better than people seem to realise or appreciate. As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK’.
Lord O’Neil also referenced a report commissioned by the Mayor of London that claimed that the UK’s GDP could be some 3% lower by 2030 as a result of Brexit, saying that ‘If that’s the worst that Brexit will deliver, then I wouldn’t worry about it’.
He continued:
‘If its only three per cent, what’s going on with the rest of the world – helping us – and with productivity improving, that will easily dwarf a three per cent hit over 13 years, easily’.
Crude Oil Surge Expected, Canadian Dollar (CAD) Exchange Rate Outlook Bolstered
On the Canadian front, optimism has begun to resurface regarding the possibility of an ongoing bullish crude-oil run.
After three years of doom and gloom some analysts have begun to suggest that crude oil’s rout is over, with many going as far as predicting a climb to $100 a barrel.
Analysts cite a slump in new production outside of the US as one of the primary causes, with ongoing measures by OPEC expected to continue successfully curbing supply.
Beyond this, the International Energy Agency has forecast that global demand will exceed 100 million barrels a day for the very first time in Q4 this year; demand that could potentially push oil into the triple-digit realm.
With crude oil being Canada’s primary export a surge in prices could bode extremely well for the Canadian Dollar (CAD).
GBP/CAD Exchange Rate Volatility Expected on UK GDP and Canadian Inflation
Markets will be keen to assess a run of pertinent ecostats this Friday, with the UK’s Q4 gross domestic product readings and Canadian inflation figures both due.
Year-on-year UK GDP is forecast to drop from 1.7% to 1.4% in Q4 2017, whilst the quarterly figure is expected to remain steady at 0.4%. This eventuality would not bode well for the UK’s economy moving into 2018 and it would likely put the GBP/CAD exchange rate under increased pressure.
Canadian inflation is expected to fall year-on-year in December from 2.1% to 1.9%; a notable drop, though markets are now predominantly concerned with the possibility of NAFTA’s termination.
Bank of Canada (BoC) Governor Stephen Poloz stated at the recent January monetary policy press conference that they are ‘reaching the danger zone right now’, asserting that if no progress is made then the White House could simply pull out of the deal.
This would significantly curb a massive amount of Canadian trade and potentially send the Canadian Dollar tumbling.
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