The Pound (GBP) has continued to appreciate against the Canadian Dollar (CAD) today, despite the recent threat of tariffs against UK goods.
US President Donald Trump has threatened to place tariffs on vehicle imports from the EU, stating:
Based on the Tariffs and Trade Barriers long placed on the U.S. and it great companies and workers by the European Union, if these Tariffs and Barriers are not soon broken down and removed, we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!
— Donald J. Trump (@realDonaldTrump) June 22, 2018
Automobile shares have fallen on this warning, but because UK vehicle exports are minor compared to other EU nations, this hasn’t caused GBP/CAD losses.
(Last updated 16:34 GMT, June 22nd, 2018)
Risk of GBP/CAD Exchange Rate Slump on UK GDP Downgrade
This strong performance follows a Bank of England (BoE) interest rate decision which suggested that higher interest rates are on the way.
Beyond today’s day of optimism for GBP traders, however, the Pound remains at risk of declining when UK GDP data comes out on 29th June.
The finalised stats for Q1 2018 are predicted to confirm that GDP growth slowed at the start of the year, which might cause GBP/CAD losses.
An annual dip from 1.4% to 1.2% and a quarterly decline from 0.4% to 0.1% have been forecast; if the actual readings are highly positive then Sterling could rise.
Are GBP/CAD Exchange Rate Losses Incoming on Services PMI Slowdown?
Further ahead, the Pound to Canadian Dollar exchange rate (GBP/CAD) could face further difficulties when the UK services sector PMI comes out on 4th July.
This major measure of economic activity is predicted to show a slowdown during June, which could be enough to cause GBP/CAD exchange rate losses.
The services sectors covers a broad spread of the UK economy, factoring in tourism revenues, financial services and retail sales, among other fields.
Canadian Dollar to Pound Exchange Rate Forecast: Will CAD/GBP Rise on Inflation Rate Acceleration?
The Canadian Dollar (CAD) has fallen by -0.7% against the Pound (GBP) today, but might be able to recover in value as soon as Friday afternoon.
Canadian economic data out on the day will consist of inflation rate stats for May, covering year-on-year and month-on-month readings.
In a supportive situation, the base annual and monthly readings are both forecast to show rising GDP growth, from 2.2% to 2.6% and from 0.3% to 0.4% respectively.
Higher inflation will increase the chances of a Bank of Canada (BOC) interest rate hike, as higher interest rates can have a reductive effect on inflation.
The core annual reading, which covers price shifts without fuel and food included, is tipped to show a slowdown from 1.5% to 1.4%.
Despite this, the Canadian Dollar could still appreciate on Friday afternoon if both the non-core readings show higher levels of growth.
Extended Canadian Dollar Prediction: Chance of CAD/GBP Volatility on CA GDP Data
Looking further ahead, the Canadian Dollar to Pound (CAD/GBP) exchange rate might also be affected by GDP data next Friday, on June 29th.
Canada’s growth reading will cover April; in 2018 so far, the monthly GDP measure has shown a contraction in January but a supportive rise in February and March.
Economists are currently unsure about how the GDP stats will print, which increases the potential for Canadian Dollar volatility when the results come out.
If the GDP figure shows a slowdown during April then the CAD/GBP exchange rate could worsen; a converse acceleration might boost the Canadian Dollar.