Pound to Canadian Dollar Exchange Rate Tumbling as Commodity News Bolsters CAD
Despite freshly escalating trade tensions between the US and China, the relatively risky trade-correlated Canadian Dollar (CAD) has seen strong gains versus the Brexit-battered Pound (GBP) since last night, and the Pound to Canadian Dollar (GBP/CAD) exchange rate hit its worst levels in two months.
Sterling has seen building downside pressure since early May as Brexit fears return. Following last week’s GBP/CAD tumble, the pair has continued to plunge this week following a very brief recovery attempt on Monday.
GBP/CAD opened this week at the level of 1.7440 and briefly edged higher, before resuming its fall.
Since Wednesday, GBP/CAD losses have been even more significant, and at the time of writing today the pair was trending near a low of 1.7198. This was the worst GBP/CAD level since late-February, over two months ago.
The Pound to Canadian Dollar exchange rate could still be in for further losses as well, as the Pound outlook is dominated by rising expectations of long-term Brexit uncertainty. However, the Canadian Dollar’s gains are limited due to market trade jitters.
Pound (GBP) Exchange Rate Selloff Continues as UK Leadership Fears Rise
Hopes that cross-party Brexit talks could lead to a softer Brexit solution being reached have all but faded, as this week investors are becoming increasingly concerned that UK Prime Minister Theresa May will fail to make significant Brexit process before stepping down.
In attempt to bolster support for her Brexit plan, Prime Minister May indicated earlier in the year that she would step down from her leadership if the plan succeeded.
However, this failed to generate sufficient support for the plan, and backbenchers in the Conservative Party still expect May to step down by the end of June.
It means that May’s plan to hold a fourth vote on her government’s Brexit deal in June is being perceived as a ‘last chance’ for her deal before a change in leadership.
The change in leadership without a Brexit solution being reached, potentially to a leader that advocates for a harder Brexit, has left the Pound highly unappealing as the outlook is filled with political uncertainties.
Canadian Dollar (CAD) Exchange Rates Supported by Commodities
Demand for the Canadian Dollar was surprisingly strong today, despite rising concerns about US-China trade relations.
Trade tensions between the world’s two biggest economies flared up again despite months of negotiations, making investors anxious about the health of global trade.
Despite this though, the trade-correlated Canadian Dollar has been relatively bullish this week, especially against the highly unappealing Pound.
This has been due to other factors supporting Canadian Dollar resilience. As oil is Canada’s biggest export, oil prices rising for three consecutive sessions has supported Canadian Dollar demand.
Reports that the US was getting closer to resolving issues on metal tariffs with Canada and Mexico also made the Canadian Dollar more appealing.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Investors Anticipate Canadian Employment Figures
Unless there is a sudden selloff in the Canadian Dollar, the Pound to Canadian Dollar (GBP/CAD) exchange rate is likely to end this week much lower.
UK politics and Brexit are unlikely to give Pound investors much to be optimistic about any time soon, so there is a lot of pressure in the Pound outlook.
The Canadian Dollar still has potential for losses though. The currency has been surprisingly resilient despite US-China trade tensions making investors averse to trade-correlated currencies.
This means that if US-China trade jitters continue to keep up the pressure on trade-correlated currencies, or if upcoming Canadian data disappoints investors, the Canadian Dollar could shed some recent gains.
Tomorrow will see the publication of Canada’s April ADP employment change report.
Weak data could worsen concerns about the resilience of Canada’s economy and make it easier for the Pound to Canadian Dollar (GBP/CAD) exchange rate to recover a little.