Over the last week, GBP CAD has seen mostly flat trade as Sterling is kept weak by UK general election uncertainty while the Canadian Dollar is weighed on by oil market concerns.
The Pound to Canadian Dollar exchange rate began the week trending at the level of 1.7385 and has largely trended within half a cent of this level since then.
Pound (GBP) Direction Will Shift on UK Election Results
The Pound is largely directionless this week and the outlook is murky. Investors had previously been much more optimistic on Sterling as UK Prime Minister Theresa May’s Conservative party was expected to win a strong majority in the UK general election she called. This would give May more room to breathe in Brexit negotiations over the next two years.
However, in recent weeks Theresa May and the Conservatives’ popularity has dropped while the popularity of opponent Jeremy Corbyn and his Labour party has risen.
According to polls the gap between the two parties has continued to thin. Some polls now even have the Conservatives just one point ahead of Labour, well within a margin of error.
However, a wide variety of polling methodologies this year has meant a wide variety of polling results. Some polls still give the Conservatives a big majority of 11 points over Labour.
Unsurprisingly, this has led to market uncertainty. An increasing number of analysts are calling a ‘hung parliament’ a possibility now, which would mean a weaker government and tougher Brexit negotiations whether a coalition is made or not.
This would lead to a Pound selloff when the results are announced on Thursday night and Friday, and the British currency’s long-term outlook would worsen.
Most analysts still believe a Conservative majority is the most likely result however, as do betting markets. In the event of a big Conservative win, GBP CAD will advance when election results come in.
Canadian Dollar (CAD) Under Pressure on Oil Concerns
A lack of highly influential Canadian data this week has left the Canadian Dollar largely reacting to oil news this week, as oil is Canada’s most lucrative commodity.
The biggest event for oil investors and CAD investors this week has been news that a number of middle-eastern nations have cut diplomatic ties with Qatar, amid concerns about Qatar’s connections with extremism and terrorism.
Saudi Arabia, United Arab Emirates (UAE), Egypt, Bahrain and Yemen cut ties with Qatar earlier in the week. Some other nations have joined the move since.
Many of these nations have cut off land, sea and air links with Qatar, making trade in and out of the nation more difficult.
The surprise news sparked speculation that Qatar may react by defying OPEC-led oil production cut plans and ramping up oil production. This has kept pressure on the Canadian Dollar.
However, as Qatar is not a majorly influential oil producing nation, analysts predict this will not have a significant long-term effect on oil prices.
This has kept GBP CAD just below the week’s opening levels, though oil prices remain weak anyway on oversupply preventing the ‘Loonie’ from capitalising. The Canadian Dollar outlook could improve if Friday’s Canadian unemployment data beats expectations.
GBP CAD Interbank Rate
At the time of writing this article, the GBP CAD exchange rate trended in the region of 1.7340. The Canadian Dollar to Pound exchange rate traded at around 0.5760.
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