Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Softens on NAFTA Deal Hopes
Reports of an imminent ‘handshake’ agreement on NAFTA left the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate on a weaker footing.
While the Trump administration’s approach to trade has remained generally combative the prospect of NAFTA progress encouraged the Canadian Dollar (CAD) to strengthen.
As oil prices continued to push higher on Wednesday morning this offered additional support to CAD exchange rates, even in the wake of disappointing domestic data.
A larger-than-expected drop in the American Petroleum Institute (API) crude inventories figure encouraged the price of Brent crude to strengthen, to the benefit of the commodity-correlated Canadian Dollar.
Weaker Canadian Retail Sales to Benefit GBP/CAD Exchange Rate
However, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could find a rallying point on the back of June’s Canadian retail sales data.
Forecasts point towards a contraction in sales on the month, something which would undermine confidence in the health of the wider economy.
Following on from Tuesday’s disappointing wholesale trade sales figure another weak showing is likely to diminish the incentive for the Bank of Canada (BOC) to maintain a more hawkish policy outlook.
As a result, market attention is likely to turn towards the latest commentary from BOC Governor Stephen Poloz during his appearance at the Jackson Hole economic symposium.
If Poloz sounds a more optimistic note this could give CAD exchange rates a fresh boost heading into the weekend.
Brexit-Based Worries Remain Key Influence on Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate
In spite of the chief Brexit negotiators sounding a more optimistic note at the latest joint press conference the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate remains vulnerable.
Worries over the likelihood of a no deal Brexit continue to hang over the outlook of the UK economy and demand for Pound Sterling (GBP), with progress on key issues still proving elusive.
Until a greater sense of clarity emerges investors are likely to maintain a relatively bearish view of GBP exchange rates.
As analysts at Standard Chartered Bank commented:
‘The biggest risk remains a disorderly, cliff-edge, ‘no-deal’ Brexit.
‘The number of potential scenarios and end-states is as high as ever and no scenario, including no deal, can be ruled out at this stage.
‘However, we think that developments over the past few weeks have offered a few reasons why fears of this scenario may currently be overblown.
‘Notwithstanding the uncertainties, our core view remains that a soft Brexit will be brokered between the UK and EU. However, the process leading to this result could still involve an extension of Article 50, a leadership challenge and even a general election.’
Thursday’s CBI reported retail sales survey may put additional pressure on the Pound, with the headline index expected to show a decline in demand on the month in August.
Further evidence that the UK economy is struggling to gain momentum could keep the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate on the back foot.
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