Pound to Canadian Dollar Exchange Rate Fluctuates Ahead of Key Thursday Data
This week’s trade session has been mixed for the Pound to Canadian Dollar (GBP/CAD) exchange rate outlook so far, as markets remain anxious about the seemingly unpredictable nature of US stances on global trade.
Could GBP/CAD be in for another week of largely flat movement? GBP/CAD slipped from 1.8262 to 1.8213 last week and so far this week has fluctuated around that opening level.
Either way though, any notable developments regarding Brexit or US trade stances have the potential to affect the Pound to Canadian Dollar exchange rate in both the short term and the long term.
Key UK and Canadian growth data due on Thursday also has the potential to influence the GBP/CAD outlook, particularly if one of them impresses but the other disappoints.
Pound (GBP) Exchange Rates Supported by Hopes for Resolution to Brexit Border Issue
Hopes that the UK and EU were getting closer to reaching an agreement on the issue of the Irish border supported the Pound (GBP) on Wednesday and helped the British currency avoid further losses against the Canadian Dollar (CAD).
Reports suggesting that Britain will soon propose a new potential solution to the issue made investors more optimistic about the outcome of one of the most contentious issues of Brexit negotiations.
As the UK government has wanted Northern Ireland to maintain a soft border with both the rest of the UK and the Republic of Ireland, disagreements about how to handle this issue have been a major sticking point in Brexit talks.
On Wednesday, news emerged that Irish officials should expect imminent proposals from the UK government on its new plans for how to handle the border.
It followed a brief selloff on Tuesday, which was caused by end-of-quarter fixings. Pound investors sold the currency from its highs following a week of strong gains.
Canadian Dollar (CAD) Exchange Rates Limp as Commodity Prices Weaken
The risky commodity-correlated Canadian Dollar saw mixed performance on Wednesday, as despite hopes that the US would not pull out of North American Free Trade Agreement (NAFTA) talks, the Canadian Dollar remained pressured by other trade news.
Prices of oil, Canada’s most lucrative commodity, have fallen back from 2018 highs in recent sessions due to unexpectedly high US oil stocks, as well as a strengthening US Dollar (USD).
This weighed on the oil-correlated Canadian Dollar.
On top of this, markets remained anxious about the possibility that protectionist rhetoric on global trade from the US could spark a global ‘trade war’, which would likely have a negative impact on trade-heavy economies like Canada’s.
Pound to Canadian Dollar (GBP/CAD) Forecast: Major Growth Stats on Thursday
Most of this week’s most influential UK and Canadian data will be published on Thursday, including the publication of major Gross Domestic Product (GDP) results for both nations.
Britain’s final Q4 2017 growth results will be published in the European session. UK growth is expected to have slowed from 0.5% to 0.4% quarter-on-quarter and from 1.8% to 1.4% year-on-year.
Canada’s own growth results from January 2018 will be published during the American session. The growth rate is expected to remain at a slow but steady 0.1%.
According to Mack McCormick from TD Securities in Toronto, the data could influence Bank of Canada (BOC) interest rate hike bets;
‘I think what people are focusing on is what’s the tone of growth, where is the economy going and whether or not there’s enough strength in the economy and enough momentum to continue to see the Bank of Canada’s pricing around two rate hikes this year continue to hold up,’
Of course, any developments on the US stances on trade or NAFTA are likely to have an impact on Canadian Dollar trade too. If the perceived chance of a ‘trade war’ worsens, the Canadian Dollar outlook will weaken.