Pound (GBP) Exchange Rates Surged on High Court Brexit Ruling News
Confidence in the Pound (GBP) has been sharply boosted by a successful High Court challenge to Theresa May’s right to trigger Article 50 without a parliamentary vote. Although the government will take the decision to the Supreme Court this nevertheless raised market hopes for avoiding a ‘hard’ Brexit.
Demand for Sterling was equally shored up by an unexpectedly strong October Services PMI, which clocked in at 54.5 rather than the 52.5 that had been forecast. This indicated that the service sector had remained in a robust state at the start of the fourth quarter. While this stronger showing offered additional support to the GBP CAD exchange rate the report was not entirely positive, with David Noble, Chief Executive Officer at the Chartered Institute of Procurement and Supply, noting:
‘The rate of charge inflation gathered speed to its fastest level since April 2011. Higher costs for food and cars were reported and are likely to have a further impact on the growth of the UK economy as the months of uncertainty around the referendum bear down on the sector.’
Oil markets, meanwhile, have not been in a particularly optimistic mood this week, with doubts building over the likelihood of OPEC agreeing any production cuts at its upcoming meeting. As US stockpiles were found to have increased markedly in the last week, the price of Brent crude has remained trapped below US$48 per barrel, weighing on the commodity-correlated Canadian Dollar (CAD). Worries over the outcome of the US presidential election also limited the appeal of the ‘Loonie’ as risk appetite weakened, benefitting the Pound Canadian Dollar (GBP CAD) exchange rate.
GBP CAD Exchange Rate Forecast: Falling Canadian Employment Could Weaken ‘Loonie’ Further
Ahead of the weekend the Canadian Dollar is expected to remain on a weaker footing, with forecasts pointing towards a deterioration in the strength of the labour market. Investors anticipate that the number of employed dropped by -15,000 in October. While this would not be enough to nudge up the corresponding unemployment rate this would nevertheless soften confidence in the robustness of the Canadian economy. With concerns over domestic growth persisting this could see the GBP CAD extending its bullish trend.
Political uncertainty stemming from the US presidential election could also weigh on the ‘Loonie’ in the near term, with a win for the Republican candidate being viewed as a significant risk event. In the event of a Trump victory the Federal Reserve is considered unlikely to raise interest rates before the end of the year, though. If the latest US payrolls data fails to impress then the Canadian Dollar could find some measure of fresh support.
Ongoing developments in the Brexit debate look set to impact the GBP CAD exchange rate for some time to come. As a result the Pound may struggle to hold onto its recent gains for long.
Current Interbank Exchange Rates
At the time of writing, the Pound Canadian Dollar (GBP CAD) exchange rate was trending bullishly around 1.66, while the Canadian Dollar Pound (CAD GBP) pairing was slumped in the region of 0.60.