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Pound to Canadian Dollar Exchange Rate Forecast: GBP/CAD Outlook near 6-Month-Lows on ‘No Deal’ Brexit Fears

Pound to Canadian Dollar Exchange Rate Hits Fresh 6-Month-Lows on Monday Morning

Brexit jitters and market optimism surrounding Canada’s economic outlook left the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate as one of last week’s worst-performing Pound (GBP) pairings – and that bearish movement could continue this week.

Last week, GBP/CAD opened at the level of 1.7107 and briefly edged higher before spending most of the week tumbling. GBP/CAD closed the week near lows, at the level of 1.6893.

When markets opened on Monday morning, GBP/CAD slipped lower still as Brexit fears persisted. At the time of writing, GBP/CAD trended near the level of 1.6860 – the pair’s worst level since January 2018.

Investors continue to find the Canadian Dollar (CAD) appealing, due to signs that the Bank of Canada (BoC) will remain hawkish, as well as hopes for North American Free Trade Agreement (NAFTA) renegotiations.

This has allowed a resilient Canadian Dollar to easily press on higher against a weak Pound.

Pound (GBP) Exchange Rate Outlook Pressured by Worsening Brexit Fears

A fresh interest rate hike from the Bank of England (BoE) and decent UK ecostats in recent weeks have not been enough to help the embattled British currency become more appealing.

Even in decent UK economic results, Brexit uncertainties remain a significant obstacle in business outlooks and have been weighing on new orders and investments from UK businesses.

Worse still, the UK is set to formally leave the EU in March 2019 – now well under a year away – and the UK government appears no closer to agreeing a Brexit deal with the EU.

In fact, some analysts and even a few officials are becoming increasingly anxious about the possibility that a ‘no deal’ Brexit is becoming more likely, rather than less likely.

The Sterling outlook was heavily pressured towards the end of last week as Bank of England (BoE) Governor Mark Carney said the possibility of a ‘no deal’ Brexit was becoming uncomfortably high.

Then over the weekend, UK Trade Minister Liam Fox said he believed the UK was actually heading towards a ‘no deal’ Brexit and the chances of one happening were currently around 60-40. This led to a fresh Sterling selloff when markets opened on Monday.

Canadian Dollar (CAD) Exchange Rates Supported by Surprisingly Strong Canadian Outlook

A miss in last week’s Canadian manufacturing PMI wasn’t enough to leave the Canadian Dollar unappealing, as other Canadian data, combined with more optimism on Canadian trade, has left investors optimistic about Canada’s economic outlook.

Last Friday saw the publication of Canada’s June trade balance results, which beat expectations despite recent US trade protectionism and trade war jitters in markets.

The trade deficit unexpectedly lightened from C$-2.72b to C$-0.63b, and exports improved from C$48.7b to C$50.7b.

As the data was optimistic despite US trade protectionism, investors became even more optimistic that more interest rate hikes from the Bank of Canada (BoC) were on the way.

According to Marc Chandler, global head of currency strategy at Brown Brothers Harriman New York:

‘I think the Bank of Canada is probably the only other major central bank that is going to be able to keep up with the Fed in terms of monetary policy and you can see this in the Canada-US 2-year note yield differential.’

On top of solid domestic news, Canadian Dollar investors have also been more optimistic about the chances of North American Free Trade Agreement (NAFTA) renegotiations going smoothly, giving investors plenty of reasons to buy the Canadian Dollar despite trade jitters.

Pound to Canadian Dollar (GBP/CAD) Forecast: Canadian Housing Data Ahead

In the coming sessions, the Pound to Canadian Dollar (GBP/CAD) exchange rate is likely to be driven by either Canadian data or any potential developments in Brexit news.

Amid a lack of notable UK ecostats due for publication until the end of the week and the latest ‘no deal’ Brexit scares, Pound investors will be hoping for any signs that the UK and EU could still reach a good deal.

Promising news of a Brexit deal would heavily support Pound demand, and GBP/CAD would rise. However, unless the news is particularly optimistic the Canadian Dollar’s strength could persist and keep pressure on GBP/CAD.

Tuesday will see the publication of Canada’s July Ivey PMI, followed on Wednesday and Thursday by the latest Canadian housing data.

If upcoming Canadian data impresses investors, the Pound to Canadian Dollar exchange rate is likely to remain near its recent lows as the Canadian Dollar’s strength is supported.

In terms of the longer Pound to Canadian Dollar (GBP/CAD) exchange rate outlook though, Friday’s key UK growth data and Canadian job market results have the potential to shift the direction of the GBP/CAD outlook further.