Pound to Canadian Dollar Exchange Rate Fails to Sustain Yesterday’s Jump
The Pound (GBP) briefly saw a surge in demand yesterday, but the currency’s outlook remains too pressured by Brexit uncertainties to sustain major gains and as a result the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was tumbling again today.
Since opening this week at the level of 1.7071, GBP/CAD has spent the last few sessions trending with an upside bias.
GBP/CAD jumped over a cent on Tuesday evening and touched a February high of 1.7286, but since then has been sliding and has shed around half of those gains. At the time of writing today, GBP/CAD was trending near the level of 1.7161.
The Canadian Dollar (CAD) outlook has been stronger recently. A combination of optimism for US-China trade developments and stronger commodity prices made it easier for the Canadian Dollar to advance today.
Pound (GBP) Exchange Rates Fail to Hold Gains as Brexit Optimism Lightens
Most of the Pound’s gains on Tuesday were due to market optimism that the UK and EU could reach some kind of breakthrough in Brexit negotiations during high-level talks today.
However, as investors digested the speculation, analysts ultimately perceived it as fairly unlikely that a potential breakthrough would be major enough to make the government’s Brexit plan popular enough to pass through Parliament.
Investors sold the Pound today as they reassessed the chances of today’s Brexit news actually having an impact on the Brexit outlook.
On top of this, the Pound’s appeal was further limited by news that three members of the Conservative Party had split from the party to join an Independent Party started by ex-Labour Party MPs earlier in the week.
This made it easier for a stronger Canadian Dollar to regain some of yesterday’s losses versus Sterling.
Canadian Dollar (CAD) Exchange Rates Benefits from Risk-On Movement
Despite a lack of supportive Canadian data in recent sessions, the Canadian Dollar has seen strong demand this week so far.
The Canadian Dollar is a relatively risky trade-correlated currency, and so has been more appealing as investors amid the recent optimistic trade news.
US-China trade negotiations are perceived as going well, with high level officials showing signs that a deal is getting within reach.
According to Rahim Madhavji, President at Knightsbridge Foreign Exchange in Canada:
‘It seems to be a risk-on event,
There are some rumors going around that there’s some potential breakthrough in terms of talks with China.’
On top of this, the Canadian Dollar has been more appealing due to stronger prices in oil, Canada’s most lucrative commodity.
Oil prices have slipped slightly today, but have still risen by around 20% this year thanks to planned oil production cuts. It has been among the primary reasons for Canadian Dollar strength.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Investors Await Key Canadian Data
The Canadian Dollar saw a solid rebound versus the Pound today, but demand for the risky ‘Loonie’ could strengthen even further if upcoming Canadian data impresses investors.
Virtually all of the week’s most influential Canadian data will be published tomorrow and Friday.
Canada’s January employment report from ADP and December wholesale sales figures will be published during Thursday’s American session, with Canada’s key December retail sales results due at the end of the week.
Retail sales could be particularly influential and could lead to GBP/CAD losses if they disappoint investors.
Bank of Canada (BoC) Governor Stephen Poloz will hold a speech on Thursday evening, which could also prove influential for Canadian Dollar investors.
As for the Pound, with this week’s UK data unlikely to influence the Pound outlook investors will remain focused on potential Brexit developments.
If the UK and EU reach any breakthrough in negotiations the Pound to Canadian Dollar (GBP/CAD) exchange rate outlook will surge, but analysts predict this is unlikely so GBP/CAD may be more likely to shed its recent gains instead.