- GBP CAD Exchange Rate Hovers Around 1.7240 – ‘Loonie’ uninspired on Monday
- Update: Pound Up as Next PM Confirmed – Theresa May could be in office by Wednesday
- Canadian Dollar Undermined by Oil, Poor Labour Figures – Struggles to hold against Pound
- Forecast: Bank of England (BoE) Meeting Thursday – BOC also meeting Wednesday
GBP CAD Soars Throughout Tuesday
The Pound to Canadian Dollar exchange rate surged during Tuesday’s European session. Poor oil prices continued to weigh down the oil-sensitive ‘Loonie’, allowing the Pound to easily capitalise and advance.
Sterling has been bullish since Monday afternoon, which saw outgoing Prime Minister David Cameron confirm that Theresa May would be in office by Wednesday evening.
Political uncertainty remains high in the UK however as the Labour leadership crisis heats up. An expected Bank of England (BoE) rating cut is also likely to weigh on Sterling sentiment in the coming day, and could lead to GBP/CAD losing many of its recent gains if it is confirmed on Thursday.
More imminent is Wednesday’s Bank of Canada (BOC) decision meeting. Rates are expected to remain frozen, but markets could still react to bank policymakers’ views on how safe Canada is from Brexit-influenced damage.
(Previously updated 15:58 BST 11/07/2016)
GBP CAD Exchange Rate Changes Course after Sudden UK Leadership Winner
Despite trending relatively flatly earlier in the European session, the GBP CAD exchange rate surged upwards on Monday afternoon in response to news that the British Prime Minister Leadership contest had ended – much earlier than expected.
Of the two remaining candidates, Andrea Leadsom dropped out of the race on Monday and announced her backing for frontrunner Theresa May. This made May the only remaining candidate and the de-facto Prime Minister successor.
Outgoing PM David Cameron announced on Monday afternoon that he would hold one last Prime Minister’s Questions (PMQs) on Wednesday, but expects to have May in office by Wednesday evening.
As the onslaught of political uncertainty had been one of the major reasons for Sterling’s recent weakness, the news that Britain’s new leadership was already on track well ahead of the previously expected September date boosted the Pound across the board.
(Published 13:45 BST 11/07/2016)
The GBP CAD exchange rate recovered almost half of its weekly decline on Thursday and Friday last week, as domestic and commodity news weakened the Canadian Dollar while the Pound advanced from its worst levels.
Still well down from last week’s opening levels of 1.1712, GBP/CAD was able to recover from its lows of 1.6702 to reach 1.6893 by the weekend. At the time of writing, the pair had slipped again and trended in the region of 1.6863.
Pound (GBP) Struggles to Maintain Levels Amid Brexit Jitters
After a limited relief rally on Thursday and Friday last week, the Pound appears to be uninspired again this week as other currencies have easily managed to gain against it.
However, the Pound to Canadian Dollar exchange rate has been relatively flat in comparison, with both currencies being weighed down by respective domestic worries.
As would be expected, the Pound remains highly volatile and easily pressured since late-June’s EU Referendum vote. Brexit news continues to dampen sentiment for the currency to new lows.
According to a Monday report from BDO, Britain’s economy has already begun to see damage from a drop in business confidence and activity. This downtrend began even before the EU Referendum vote and appears to have worsened since;
‘Business output – which reflects companies’ experience of orders for the three months ahead – now sits at 99.0, whereas business optimism – which predicts growth six months ahead – fell to 98.9. UK Manufacturing continues to have the gloomiest outlook, with its optimism sub-index slumping to 83.8.
Uncertainty surrounding Brexit also contributed to the continuing slowing rate of job creation. BDO’s Employment Index – which indicates firms’ intentions to hire – has now dropped to 101.4, and is currently at a two year low.’
BDO Partner Peter Hemington commented on the report, claiming that businesses had to remain strong in the face of Brexit concerns in order to protect the UK economy.
Canadian Dollar (CAD) Flat as Oil Price Continues to Fall
Prices of Canada’s most lucrative commodity, oil, have been struggling to remain high in the weeks following the EU Referendum result. This has caused the oil-sensitive Canadian Dollar to struggle.
While the commodity was initially sturdy, a global increase in economic anxiety has damaged demand for oil across the market. Reuters reports;
‘Rising Canadian oil flows are having difficulty finding space in pipelines, weighing on Canadian prices, now at a $15 discount to WTI.
Iran set the official selling price of its light grade for Asia at $0.45 above the Oman/Dubai average for August, down 40 cents on the month.
Traders said the lower prices were a result of Asian refiners beginning to cut crude orders, and also to the region’s economic slowdown.’
Last week’s Canadian labour report also weighed on the ‘Loonie’ Dollar. While the key unemployment rate dropped from 6.9% to 6.8%, this was due to a drop in the participation rate (65.7 to 65.5) rather than an increase in employment.
In addition, a huge 39.4 increase in part time employment jobs was offset by an even bigger 40.1 drop in full time jobs.
Being released alongside the impressive June Non-Farm Payroll report for the US, the disappointing Canadian report led to a drop in risk sentiment as investors left the ‘Loonie’ in favour of the ‘Greenback’.
GBP CAD Exchange Rate Forecast: BoE, BOC Central Bank Decisions Ahead
The Bank of Canada (BOC) and Bank of England (BoE) are both due to meet in the next few days. While the BOC is not expected to cut its key interest rate when it meets tomorrow, markets will likely pay close attention to any potential Brexit-related statements from the bank.
If the BOC maintains a hawkish tone and hints that the Canadian economy has been little-affected by the market’s Brexit-panic (as some have speculated), it could send the ‘Loonie’ Dollar surging.
The BoE policy meeting on Thursday will likely demand attention of markets around the globe. As the central bank’s first meeting since the EU Referendum, analysts claim there is a 75% chance that the bank will cut the key UK interest rate from 0.5% to a new record low.
While expected, a cut would likely leave the Pound weaker and see it extending its lows against the ‘Loonie’, potentially hitting a three-year-low this week. However, if the bank opts to leave rates frozen, Sterling could surge across the board in a limited relief rally.
BoE Governor Mark Carney has previously indicated that the BoE would likely have to introduce additional stimulus sometime during the summer in order to stave off Brexit damage. As a result, no interest rate cut in July would cause analysts to place bets on an August cut instead.
At the time of writing, the GBP CAD exchange rate trended in the region of 1.6850, while the CAD GBP exchange rate traded around levels of 0.5930.