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Stable Core Canadian Inflation Leaves Pound Canadian Dollar (GBP/CAD) Exchange Rate Flat

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted as Canadian Inflation Remains Steady

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate was left muted, with the pairing currently trading at around CA$1.7214.

The Canadian Dollar was left flat following the release of Wednesday’s inflation data which showed consumer prices remained steady in October.

In the first increase since July, Canadian inflation rose by 0.3% between September and October.

Meanwhile, core inflation, which is seen as a better measure of underlying inflation edged up slightly from 2% to 2.1%.

This matched some of the highest readings in the past decade, and likely provided the ‘Loonie’ with a slight upswing of support.

Stable Canadian inflation is one of the reason markets have anticipated fewer interest rate cuts from the Bank of Canada (BoC) compared to the US Federal Reserve.

In a note to clients discussing Canadian inflation, deputy chief economist at Scotiabank, Brett House wrote:

‘The October data should have no impact on the Bank of Canada: all of the risks to its outlook remain in the future at this stage.’

However, the Canadian Dollar has fallen steadily over the last three weeks, reaching a four-month range lows as a dovish BoC deputy Governor Wilkins expressed concerns about downside risks to the economy.

Sterling (GBP) Flat as Conservatives Lead the Polls

The Pound was left flat on Thursday as political developments continued to be the main catalyst for movement ahead of 12th December election.

Sterling was left under pressure thanks to Labour leader Jeremy Corbyn’s better than expected performance in Tuesday evening’s live TV election debate.

A snap poll following the debate from YouGov showed a ‘dead heat’ with 49% backing Corbyn, compared to 51% that back the current Prime Minister. According to analysts, the result is seen as more favourable to the leader of the opposition.

However, GBP is not far from six-month highs as polls continue to show Boris Johnson’s Conservatives are still ahead in the polls.

Commenting on this, Deutsche Bank analysts said:

‘Given how far Corbyn’s personal ratings are below Johnson’s and how far Labour re behind in the polls, then such a split could be seen as a small victory for the opposition.’

Increased US-China Tensions Weigh on Oil Prices

The Canadian Dollar remained muted as increased tensions between the US and China dragged on oil prices.

The ongoing protests in Hong Kong sparked a fresh bout of concern that the highly-anticipated end to the US-China trade war may be further delayed.

Some experts have warned that a ‘phase one’ deal could potentially be delayed until next year, which likely weighed on the risk-sensitive ‘Loonie’.

Markets remain wary as the US House of Representatives passed several bills to back the Hong Kong protestors despite warnings not to do so from Beijing.

Commenting on weaker oil prices, portfolio manager at Frame Funds, Hue Frame said:

‘Overnight we saw a rebound of about 3% in crude futures after a reduction in US inventories. The volatility today can be attributed to concerns surrounding the ‘phase one’ of the US-China trade deal being delayed into 2020.

‘Market participants […] hope that the slowdown in global growth will subside if a deal is struck. If [the deal is] delayed, they would more than likely sell off crude with the expectation that global demand for oil will decline during 2020 and beyond.’

Pound Canadian Dollar Outlook: Will Weak Canadian Employment Weigh on CAD?

Looking ahead to this afternoon, the Canadian Dollar (CAD) could slide against the Pound (GBP) following the release of ADP’s employment change data.

If the number of Canadians hired does not meet forecasts in October, it will likely weigh on the ‘Loonie’.

Meanwhile, the flash UK services PMI could provide Sterling with a slight upswing of support.

If November’s PMI reveals the sector has expanded following last month’s stagnation, it will likely cause the Pound Canadian Dollar (GBP/CAD) exchange rate to edge higher.