Unexpectedly Strong Canadian Jobs Report Boosts Canadian Dollar (CAD) Exchange Rates
UPDATE: The Canadian Dollar (CAD) surged higher across the board this afternoon after November’s Canadian labour market data strongly bettered forecasts.
As the unemployment rate unexpectedly tightened from 5.8% to 5.6% this encouraged investors to pile back into the Canadian Dollar, with confidence in the domestic outlook improving.
This left the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate in a slump ahead of the weekend as the case for greater Bank of Canada (BOC) hawkishness improved.
Slump in UK House Prices Weighs on Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate
Pound Sterling (GBP) fell out of favour ahead of the weekend as the Halifax house price index fell significantly short of forecast, showing a -1.4% contraction on the month.
This represents a substantial slowdown within the UK housing market as annual house price growth slipped to its weakest level in six years.
All in all, this does not paint a particularly encouraging picture of the economic outlook, highlighting the continued negative influence of Brexit-based uncertainty.
As markets increasingly expect to see Theresa May’s Brexit plan rejected by Parliament support for the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has naturally weakened.
Canadian Dollar (CAD) Muted Ahead of Labour Market Data
However, the GBP/CAD exchange rate could benefit if November’s Canadian labour market data shows evidence of weakness.
While forecasts point towards no change for the headline unemployment rate the underlying details of the report could still provoke significant volatility for the Canadian Dollar (CAD).
With the Bank of Canada (BOC) already shifting towards a less hawkish outlook any disappointment here could further undermine the odds of future interest rate hikes.
Particular focus will fall on the latest hourly wage rate data, with an easing in domestic wage growth likely to discourage policymakers.
Unless the labour market shows fresh signs of tightening CAD exchange rates look set to extend their losses heading into the weekend.
Even so, if OPEC agrees another production cut and oil prices pick up further this could give the Canadian Dollar a boost in the near term.
Brexit Uncertainty Forecast to Keep GBP/CAD Exchange Rate Under Pressure
GBP exchange rates look set to come under increasing pressure ahead of the crucial parliamentary vote on Brexit.
While the odds of a no-deal Brexit have decreased a heavy defeat for May’s plan could easily provoke renewed political jitters and potential rumbles of a leadership challenge.
The rejection of the Brexit proposal would raise fresh uncertainty over the future relationship between the UK and EU, leaving the Pound exposed to another bout of selling pressure.
Commenting on the growing sense of market apprehension, analysts at Rabobank noted:
‘The latest headlines are the EU will turn their December 13-14 summit into a Brexit crisis meeting given the Withdrawal Agreement will almost certainly have been crushingly rejected 48 hours earlier.
‘Bloomberg even suggests the EU might consider delaying Brexit day if May indicates a second referendum is needed – but how is that going to work? It would mean the government repealing Article 50 and waiting months for a new plebiscite, and that would mean the UK gets to run in the EU elections in May.’
As long as the sense of uncertainty surrounding Brexit remains unresolved the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate may struggle to make sustained gains.