GBP CAD Exchange Rate Forecast to Come Under Pressure from UK and Canadian GDP

April 27, 2017 - Written by John Cameron

STORY LINK GBP CAD Exchange Rate Forecast to Come Under Pressure from UK and Canadian GDP

The Pound Canadian Dollar exchange rate has seen significant volatility so far this week as political developments in the US fuelled some sharp market movements.

Demand for the ‘Loonie’ plunged in response to news that the US would be imposing tariffs on softwood lumber, with markets speculating that a similar move against dairy exports could be in the works.

This unexpected move naturally soured relations between the US and Canada, leaving the Canadian Dollar to trend lower across the board as economic confidence faltered.

However, after the much-anticipated reveal of the Trump administration’s tax reform proposals proved to be something of a damp squib the appeal of the ‘Loonie’ improved.

As Trump’s campaign pledge to abolish the North American Free Trade Agreement (NAFTA) was dropped the GBP CAD exchange rate weakened further.

With confidence in the abilities of the current US administration failing the Canadian Dollar benefitted from renewed US Dollar softness.

Even so, with the mood towards the Pound remaining persistently bullish the GBP CAD exchange rate was able to return to an uptrend on Thursday morning.

As opinion polls continue to give the Conservatives a significant lead over Labour markets are still betting that Theresa May will increase her majority in June, potentially smoothing the path of Brexit negotiations.

Sterling is likely to see increased volatility ahead of the weekend, however, with the release of the first quarter UK gross domestic product data.

Investors are anticipating a slowdown on the quarter, with growth forecast to have dipped from 0.7% to 0.4% in the first three months of 2017.

This could encourage fresh selling of the Pound, given that negative economic headwinds are only likely to intensify in the midst of general election jitters and Brexit-based uncertainty.

While GDP is expected to have picked up on an annual basis this is unlikely to offer particular support to GBP exchange rates at this juncture if quarterly growth disappoints.

As worries over the global oil oversupply glut mount once again the Canadian Dollar is likely to remain under some degree of pressure, thanks to its correlation with the commodity.

Signs of increased US production or doubts over the possibility of OPEC extending its output-limiting agreement may drive the price of Brent crude lower still.

The appeal of the ‘Loonie’ could improve more substantially if February’s GDP report points towards greater strength within the Canadian economy.

If growth is shown to have slowed on the month in February, though, the GBP CAD exchange rate could find another rallying point.

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TAGS: Canadian Dollar Forecasts