Pound to Canadian Dollar Exchange Rate Recovery Limited with US Election Still in Focus
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate outlook remains mixed at the end of this week. Both currencies have been throttled by politics, as Brexit and US 2020 Presidential Election uncertainty persists.
Since opening this week at the level of 1.7250, GBP/CAD has been trending with a downside bias. The Canadian Dollar (CAD) has been able to benefit from Pound (GBP) weakness despite limited strength of its own.
In the middle of the week, GBP/CAD touched on a low of 1.6996. This was the worst level for the pair in a fortnight.
Since then though, GBP/CAD has rebounded and clawed back around half of this week’s losses. At the time of writing on Friday, GBP/CAD was trending around the level of 1.7176.
If the US election begins to wrap up, Brexit uncertainty will likely return to focus for the Pound outlook. The Canadian Dollar outlook is more likely to be influenced by market oil sentiment.
Pound (GBP) Exchange Rate Strength Limited as Markets Look to Brexit Uncertainty
For much of the past week, global market uncertainty has left the Pound highly unappealing. A combination of coronavirus and Brexit fears in Britain’s outlook left the Pound vulnerable to risk-aversion.
While the US political outlook has calmed somewhat towards the end of the week, analysts expect that this will just leave the Pound focused on Brexit uncertainty again.
Yesterday’s Bank of England (BoE) policy decision has also given the Pound outlook more to be concerned about.
According to Marshall Gittler, Head of Investment Research at BDSwiss Group:
‘While the (BoE’s) Monetary Policy Committee (MPC) increased the Asset Purchase Facility by GBP 150bn, more than the GBP 100bn that the market expected, there was no change in rates and, significantly, no mention of negative rates,
Moreover the MPC projected that inflation would return to the target 2% level by the end of next year even without further rate cuts. Now that that’s out of the way, it’s back to worrying about Brexit.’
Canadian Dollar (CAD) Exchange Rates Limited as Oil Prices Remain Weak
The Canadian Dollar, like the Pound, is seeing highly mixed movement this week. The Canadian currency is finding support in US election hopes, helping it to sustain gains against a weaker Pound this week.
However, unlike other risk and trade-correlated currencies, the Pound has clawed back a good chunk of this week’s losses against the Canadian Dollar.
This is partially due to continued weakness in prices of oil, Canada’s biggest export. Oil prices have been hit amid fears that more coronavirus lockdowns around the globe will severely dent oil demand over the winter.
According to Stephen Innes, Chief Global Markets Strategist at axi:
‘Oil is down due to lingering election uncertainty, and continued worries about spiking coronavirus infections in the US and Europe weigh on sentiment.’
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook Could Rise on Brexit Hopes
For now, Pound to Canadian Dollar exchange rate investors are closely watching the outcome of the US 2020 Presidential Election.
Many States are seeing tight polls, but signs for Democrat Joe Biden to win are rising as mail ballots, sent largely by Democrat voters, continue to be counted.
Still, the possibility of market panic persists. A closer than feared result, or signs that US President Donald Trump could contest the result, could make investors hesitant to take risks again.
On the other hand, if markets begin to calm from this week of election uncertainty, the Pound outlook is likely to calm as well.
Pound investors will turn attention back to Brexit talks, which markets are still generally optimistic for. This could help the Pound to claw back some of its losses in the coming weeks.
Meanwhile, the Canadian Dollar outlook will remain sensitive to shifts in oil prices. If oil prices continue to worsen on global coronavirus fears, the Pound to Canadian Dollar (GBP/CAD) exchange rate could see stronger advances.
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