Pound to Canadian Dollar Exchange Rate Outlook Largely Unaffected by Canadian Job Results
Updated 14:12 GMT 09/03/2018:
Friday afternoon saw the publication of Canada’s February job market results, which came in close enough to forecasts to have little impact on Canadian Dollar (CAD) trade.
Canada’s participation rate remained at 65.5% rather than rising to 65.6% as forecast, meaning that the market remains smaller than expected.
However, despite this Canada’s key unemployment rate unexpectedly improved from 5.9% to 5.8% in February.
Canada’s employment change figure was forecast to improve to 20k but only reached 15.4k.
Overall, Canada’s lower unemployment rate was optimistic.
The results had little impact on the Pound to Canadian Dollar (GBP/CAD) exchange rate but the pair is likely to remain near its opening levels towards the end of this week’s trade session.
[Published 13:00 GMT 09/03/2018]
Pound to Canadian Dollar Exchange Rate Slumps Ahead of Canadian Job Market Results
Due to Brexit concerns and hints of Canadian exemption from strict US trade tariffs, the Pound to Canadian Dollar (GBP/CAD) exchange rate tumbled on Thursday night and remained weak on Friday morning.
This means that GBP/CAD had essentially shed all of its weekly gains. GBP/CAD opened the week at the level of 1.7773 and spent most of the week higher, touching on a post EU Referendum high of 1.8041 on Wednesday before tumbling again.
The primary reason for the Pound to Canadian Dollar’s (GBP/CAD) late-week losses was a report from the US Presidential administration suggesting that Canada and Mexico would be exempt from the strict trade tariffs the administration wishes to put on US imports.
A separate report indicated that the US President was also optimistic about a deal on the North American Free Trade Agreement (NAFTA).
The US Presidency’s exemption for Canada and Mexico has been seen by analysts as a move aimed at pressuring the nations to give ground in NAFTA negotiations.
Concerns that the US President would undermine or dismantle NAFTA in some way have kept the Canadian Dollar (CAD) weak in recent weeks.
Pound (GBP) Exchange Rates Pressured by Brexit Concerns and UK Data
The Pound’s (GBP) movement has been largely limp in recent sessions and this has left the currency being influenced more by movement in its rivals.
Uncertainties and a mixed outlook on Brexit negotiations, as well as underwhelming UK ecostats, have given investors little reason to make any big moves on the British currency.
Sterling investors are highly anxious about the possibility that the UK and EU will not be able to agree to a post-Brexit transition period. The EU has indicated that a transition period was still not a done deal.
If the UK and EU continue to see negotiation disagreements, there is concern that they could fall through and lead to a ‘hard Brexit’.
As a result, investors are highly anticipating the March EU summit when the UK government expects a transition will finally be agreed to.
Friday saw the publication of some notable UK ecostats but they had little impact on the Pound outlook. Britain’s trade deficit came in at £-3.074b in January, while UK manufacturing and industrial production results fell short of expectations in every major print.
Canadian Dollar (CAD) Bolstered Further by Risk-Sentiment
Despite underwhelming Canadian data in recent weeks and a cautious Bank of Canada (BOC), the Canadian Dollar’s late-week recovery was supported by global factors supporting risk-sentiment.
As the Canadian Dollar is a risk-correlated currency, it has benefitted from news that the isolated nation of North Korea has agreed to a summit of talks with South Korea in April.
North Korea’s leader has also agreed to meet the US President in May, despite the high tensions between the two for much of 2017.
Hopes for improved diplomacy with North Korea have calmed market nerves and this has made investors more eager to buy risk-correlated currencies.
Pound to Canadian Dollar (GBP/CAD) Forecast: Political Developments Remain in Focus
As next week’s economic calendar will be relatively quiet for both Britain and Canada, the Pound to Canadian Dollar (GBP/CAD) exchange rate is likely to be driven by political developments and risk-sentiment.
Pound investors will certainly continue to focus on Brexit developments. Any signs of more agreement between the UK and EU on issues like the Irish border or a transitionary period would be Pound-positive.
On the other hand, if UK and EU disagreements worsen, the Pound is likely to see weak trade in the coming week. Unless it is surprisingly optimistic, Tuesday’s Spring Statement from the UK Treasury is unlikely to make the Pound more appealing either.
Canadian Dollar movement will be driven by developments on the US Presidency’s stances on trade or NAFTA negotiations, and other factors affecting risk-sentiment like North Korea news.
Some Canadian ecostats will be published next week, including ADP’s February employment results and January manufacturing sales. There are unlikely to be particularly influential to the GBP/CAD outlook however.