GBP/CAD Exchange Rate Rangebound, Brexit Cliff-Edge Jitters Hold Back Sterling
The Pound Canadian Dollar (GBP/CAD) exchange rate held steady today, with the pairing currently trading around CA$1.726 after November’s UK Consumer Price Index remained at a three-year low of 1.5%, well below the Bank of England’s target of 2%.
Ruth Gregory, an Analyst at Capital Economics, commented:
‘The unchanged rate of inflation was a little above the projection made by the Bank of England in November and the consensus forecast of 1.4%. With inflation well below target, little sign of underlying price pressures and GDP growth running below trend, an interest rate cut on Thursday shouldn’t be completely ruled out.’
However, Brexit developments continue to hold back the GBP/CAD exchange rate today, following Prime Minister Boris Johnson’s pledge to outlaw an extension to the Brexit transition period beyond a late December 2020 deadline.
David Madden, an analyst at CMC Markets, describes the Pound’s wild fluctuations after the 12th December general election:
‘[T]he pound sold-off aggressively yesterday on the back of the no-deal fears. All of the gains the pound made against the US dollar and the euro since the exit poll on election night have been reversed. Keep in mind the pound was broadly pushing higher in the months ahead of the election.’
CAD/GBP Exchange Rate Steady, Canadian Manufacturing Sales Fall
The Canadian Dollar (CAD) failed to gain on Sterling today after yesterday’s surprise drop in Canada’s Manufacturing Sales for October, with the figure falling from -0.2% to -0.7% amid ongoing global economic uncertainty.
Kyle Dahms, Analyst at National Bank of Canada, commented:
‘After a slight decline in September, manufacturing sales disappointed consensus in October with a deeper pullback. The main source of the monthly contraction was the transportation equipment category.
‘While manufacturing sales have experienced an impressive run since 2016, global uncertainties could have weighed as shipments peaked in May of this year and registered four pullbacks in the five months since then.’
‘Loonie’ investors, however, are awaiting today’s release of the Bank of Canada’s (BoC) release of the Canadian Core Consumer Price Index, which is expected to hold at 1.9%.
The oil-sensitive CAD also continues to benefit from rising prices of crude oil.
However, US-China trade developments continue to remain in focus for the trade-reliant Canadian markets, with any signs of a breakthrough ‘phase one’ trade deal buoying the risk-averse Canadian Dollar.
GBP/CAD Outlook: Could a Dovish BoE Rate Statement Weaken Sterling?
Sterling investors will be looking ahead to tomorrow’s Bank of England (BoE) interest rate decision, which is expected to hold at 0.75%.
However, any dovish commentary from the BoE on the British economy post-Brexit would prove Pound-negative.
Brexit developments will also continue to drive the GBP/CAD exchange rate this week, with any signs of souring relations between the UK and the EU ahead of the 31st January Brexit deadline weakening Sterling on heightened no-deal fears.
Tomorrow will also see the release of the UK Retail Sales figure for November, with indications of improvement providing some uplift for the GBP/CAD exchange rate.
Meanwhile, ‘Loonie’ traders will be awaiting tomorrow’s release of the Canadian Wholesales Sales figure, which is expected to deteriorate from 1% to -0.1%.