Appointment of ‘No Deal Minister’ could Drag GBP/CAD Exchange Rate Down
A recent cabinet reshuffle has failed to excite Pound traders, leading to a Pound to Canadian Dollar (GBP/CAD) exchange rate decline.
Despite the muted reception, the reshuffle aftermath has nonetheless opened the door to future Pound volatility.
A risk to the Pound’s value is the appointment of a government minister to handle a possible ‘no deal’ Brexit arrangement.
Some economists suspected that Theresa May would create such a position during her uninspiring cabinet reshuffle, but these assumptions were left incorrect.
Responding to the news, a government minister told the Telegraph that;
‘It was commonly expected among Brexiteers that [the department for Brexit] would be split in this way, otherwise our negotiating stance is not credible’.
This doesn’t mean that such a position won’t be generated in the future; if it does then the Pound could drop sharply against the Canadian Dollar.
Mrs May has long struggled to balance the demands and loyalty of pro-Brexit MPs, so a sizable concession to them is not out of the question.
Any signs that the government still thinks that ‘no deal is better than a bad deal’ is cause for concern, as it means that the UK risks an economically turbulent exit from the EU.
CAD/GBP Forecast: Will Canadian Dollar Rally on BOC Rate Hike?
Even on the first month of 2017, there is a chance for a major Canadian Dollar to Pound (CAD/GBP) exchange rate rise.
The Bank of Canada (BOC) will be making its first interest rate decision of the year on 17th January and a number of experts are forecasting a rate hike from the central bank.
Canadian Imperial Bank of Commerce (CIBC) Chief Economist Avery Shenfeld has stated that the odds are good for action from the BOC;
‘The [business outlook] results are in, and they are more than good enough.
Overall, enough in here on the plus side to cement the case for a rate hike later this month’.
All six of Canada’s largest banks are now forecasting a national interest rate hike on 17th January, which has given credence to trader expectations.
If the BOC does push Canadian interest rates higher next week, the Canadian Dollar to Pound exchange rate could see a significant rise.
Crude Oil Price Growth may Push CAD/GBP Exchange Rate Higher Still
Away from next week’s BOC interest rate decision, the Canadian Dollar could also see support from additional growth in the price of crude oil.
Since mid-December 2017, the cost of the nationally important commodity has been steadily rising, from around $56.50 per barrel to $63.50 more recently.
This advance has been caused by the decision of OPEC members to cut production, which has led to lower inventories but sustained levels of demand.
If crude oil prices continue their upwards trajectory in the coming days, the Canadian Dollar could see a natural appreciation against the Pound.