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Pound Canadian Dollar Exchange Rate Steady, ‘Rehash’ US-China Trade Deal Leaves ‘Loonie’ Unmoved

GBP/CAD Exchange Rate Rangebound, Canadian Dollar Fails to Gain on US-China Trade Deal

The Pound Canadian Dollar (GBP/CAD) exchange rate held steady this morning, with the pairing currently trading around CA$1.702 after the risk-sensitive ‘Loonie’ failed to gain from the US-China ‘phase one’ withdrawal agreement, which was signed off yesterday.

Julian Evans-Pritchard, Senior China Economist at Capital Economics, commented that the deal was ‘mostly a rehash of existing commitments’.

The Canadian Dollar (CAD) failed to gain on the trade deal between the two superpowers, with markets remaining cautious as the biggest hurdles ahead of the ‘second phase’ of the agreement are yet to come.

Rebecca Harding, Trade Economist and CEO of Coriolis Technologies said the deal is ‘entirely political’, adding:

‘In an election year, President Trump can present this as a win for US manufacturers and producers.

‘He also retains leverage on China in any future trade deals that might be negotiated. Issues around China’s Intellectual Property “theft” and its security risk to the US economy have been kicked into a subsequent agreement which is unlikely to be signed before the US Presidential election.’

In Canadian economic news, ‘Loonie’ traders will be awaiting today’s release of December’s Canadian ADP Employment change report, which is expected to rise from 30.9 thousand to 51.2 thousand.

GBP/CAD Exchange Rate Steady, UK Markets Continue to Dwell on BoE Rate Cut Odds

The Pound (GBP) held steady against the Canadian currency today after yesterday saw the UK inflation report fall to a three-year low in December, raising pressure on the Bank of England (BoE) to cut interest rates this month.

Ruth Gregory, Senor UK Economist at Capital Economics, commented:

‘The figures might be enough to tip the balance on the MPC [monetary policy committee] towards an imminent rate cut. Everything now depends on the economic news over the coming weeks.’

In British economic news, today saw the release of December’s RICS housing price balance figure, which beat expectations and rose from -11% to -2% due to Prime Minister Boris Johnson’s major election win last month.

Simon Rubinsohn, the RICS Chief Economist, said:

‘Whether the improvement in sentiment can be sustained remains to be seen given that there is so much work to be done over the course of this year in determining the nature of the eventual Brexit deal.’

As Brexit uncertainty continues to weigh on the Pound today – with fears that the UK and the EU could fail to secure a free trade deal post the 31st January Brexit date – we expect the GBP/CAD exchange rate to remain subdued.

GBP/CAD Outlook: Could the Canadian Dollar Sink on US-China Trade Jitters?

Sterling investors will be looking ahead to tomorrow’s release of December’s UK retail sales figure, which is expected to rise from -0.6% to 0.7% month-on-month, while the year-on-year figure is expected to edge higher from 1% to 2.6%.

We could see the GBP/CAD edge higher as improving retail figures could lend some resistance against the BoE’s interest rate cut. However, these figures may not provide the momentum needed to improve the British economy in 2020.

Canadian Dollar traders will be paying close attention to how the newly-signed US-China trade deal develops, with any further signs that relations between the two superpowers coming under strain weakening the risk-averse CAD.