GBP/CAD Exchange Rate Rangebound as US-China Trade War Holds Back ‘Loonie’
The Pound Canadian Dollar (GBP/CAD) exchange rate steadied today and is currently trading around CA$1.6750 on the interbank market.
The Canadian Dollar (CAD) remained rangebound against the Pound (GBP) following the release of the Canadian retail sales figures for April, which came in below the forecast 0.2% at 0.1%.
Nathan Janzen, a Senior Economist at the Royal Bank of Canada, commented:
‘The more pressing risk to the economic outlook at the moment, though, remains for a potential escalation in the US-China trade spat to generate more significant negative spill overs to the Canadian industrial sector.’
With Canada’s economy sensitive to global political developments, hopes have settled on the upcoming meeting between Chinese President Xi Jinping and President Donald Trump, which is hoped to offer some compromise between the two superpowers.
Guo Shuqing, a Chairman of the China Banking Regulatory Commission, said:
‘The US can no doubt increase tariffs on us to the extreme, but this will have very limited impact on the Chinese economy. By contrast, the US itself will be hit to almost the same degree.’
GBP/CAD Exchange Rate Steady as UK Public Borrowing Hindered by Brexit Uncertainty
The Pound failed to make any gains following the printing of the UK public sector net borrowing figures for May, which came in at £4.463bn.
Howard Archer, a Chief Economic Adviser at the EY Item Club, commented:
‘Not the best news on the public finances as not only did May see year-on-year deterioration but the April shortfall was also revised up to show a weakened performance. Much will depend on whether the economy can shrug off its current weakness as well as on Brexit developments.’
In political news, last night saw the Tory leadership ballot, in which Boris Johnson and Foreign Secretary Jeremy Hunt have now become contenders in the final run until one of them becomes the future British Prime Minister.
Fears are rising, however, that the UK will leave the EU without a deal on 31October.
This came following comments from the Irish Prime Minister, Leo Varadkar, who said that there is ‘enormous hostility’ amongst the EU27’s heads of state with regard to any further delay to Brexit.
GBP/CAD Outlook: Brexit and Tory Leadership Race to Remain in Focus
Sterling traders will be awaiting the inflation report hearings from the Bank of England on Monday, and with any further dovish comments about the UK’s economy, this could weigh on the GBP/CAD exchange rate.
Canadian Dollar investors, meanwhile, will be looking ahead to Tuesday’s Canadian wholesale sales figures for April, which are expected to ease.
There are few Canadian economic data releases due out next week.
‘Loonie’ traders will instead be focusing on US-China trade developments, and any signs of a compromise emerging between the two superpowers would benefit the Canadian Dollar.
The Pound Canadian exchange rate will remain sensitive to developments surrounding both Brexit and the Tory leadership race, and with any signs of a breakthrough, this could provide some uplift for Sterling.