Easing Fears Over May’s Leadership Boost Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate
As the prospect of an imminent vote of no confidence against Theresa May appeared to diminish this encouraged Pound Sterling (GBP) to recover some ground against its rivals.
With Conservative MPs still lacking the required 48 letters of no confidence to trigger a leadership challenge the mood of GBP exchange rates improved at the start of the week.
However, political rumbles continue to limit the upside potential of the Pound, with May’s position as prime minister still looking somewhat vulnerable.
Even so, a general sense of market risk aversion and worries over the future of oil helped to keep the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate on a stronger footing.
GBP Exchange Rates Vulnerable if UK Parliament Rejects Brexit Deal
Brexit-based uncertainty could see GBP exchange rates coming under renewed pressure in the days ahead, with May still yet to put her proposed deal before MPs.
Confidence in the passage of the agreement remains decidedly lacking, with the deal facing opposition from both sides of the debate.
As Andreas Steno Larsen, research analyst at Nordea Markets, comments:
‘The House of Commons consists of 650 MPs. Of these, the Speaker and his three deputies don’t vote. The Party Sinn Fein don’t vote either (7 seats). That leaves 639 MPs, so if everyone votes, 320 is the benchmark needed for Theresa May. On our guestimate, Theresa May can safely count on 250-270 votes, 91 votes are highly doubtful and leaning against on average, while at least 278 members will surely vote against.
‘In other words there is a very high risk that the deal will not pass parliament, should it be presented.’
If the deal faces defeat this is likely to drag the Pound sharply lower across the board, with the odds of a no-deal Brexit rising significantly.
Thus, even if a leadership challenge fails to materialise, GBP exchange rates look vulnerable to fresh losses in the near future.
Canadian Dollar (CAD) Support Limited Amid Market Risk Aversion
Demand for the Canadian Dollar (CAD) may struggle to pick up substantially, however, as souring trade relations between the US and China continue to weigh on market sentiment.
As long as investors are inclined to sell out of risk-sensitive assets CAD exchange rates are likely to lack any particular sense of support.
Nevertheless, a rallying point for the Canadian Dollar may come on the back of Friday’s Canadian consumer price index and retail sales data.
With the monthly CPI forecast to show a rebound on the month in September this could encourage greater confidence in the Canadian inflationary outlook.
If the headline inflation rate continues to run above the Bank of Canada’s (BOC) 2% target rate the case for further monetary tightening could improve, to the benefit of the Canadian Dollar.
Stronger retail sales figures may also put pressure on the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate.
Comments are closed.