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Pound to Canadian Dollar (GBP/CAD) Exchange Rate Increases as Canadian Inflation Figures Decrease

December 20, 2018 - Written by John Cameron

GBP/CAD Exchange Rate Rises as Canadian Inflation Figures Drop

The Pound Canadian Dollar (GBP/CAD) exchange rate is up today, and is currently trading at CAD$1.7068 after the release of yesterday’s Canadian inflation figures showed a worse-than-expected decrease.

The Canadian Dollar (CAD) was also hit after the price of oil fell over 7% earlier this week, with the recent US rate hike further causing concerns for the Canada’s commodity exporters.

The Pound (GBP) was generally unmoved by yesterday’s release of the Retail Price Index figures for November, which decreased to 0.0% after last month’s 0.1%.

However, the Pound was somewhat strengthened by today’s better-than-expected increase in retail sales figures for November, which increased to 1.4% against last month’s -0.4%.

Ongoing Brexit uncertainty, however, has left Pound investors cautious with increasing criticism being levied at British Prime Minister Theresa May’s UK-EU withdrawal agreement.

The most notable attack came from the Labour leader, Jeremy Corbyn, who said that her deal was intended to ‘run down the clock’.

Pound to Canadian Dollar (GBP/CAD) Exchange Rate up as BoE Interest Rate Remains Static

The Pound (GBP) remained general unmoved by the Bank of England’s interest rate decision today, which remained static.

However members of the Monetary Policy Committee commented:

‘Brexit uncertainties have intensified considerably since the committee’s last meeting. [And] [t]hese uncertainties are weighing on financial markets.’

Today also saw the release of the CBI distributive trades survey for December which showed a decrease of -13% against November’s 19%, further limiting the Pound (GBP).

As we enter the Christmas period with no definitive statements on Theresa May’s Brexit withdrawal agreement – and with Parliament’s vote due to take place in mid-January – Sterling traders have remained cautious.

Labour leader Jeremy Corbyn has concluded that May ‘must set out now how she will achieve legally binding assurances before the house is due to return’ in January.

CAD/GBP Exchange Rate Drops despite Rising Employment Figures

The Canadian Dollar (CAD) benefited from today’s publication of Canada’s ADP employment change for November which showed an increase to 39.1K against last month’s 1.8K.

These were followed by Canada’s wholesale sales figures for October which showed a better-than-expected increase.

Tomorrow, meanwhile, will see the release of Canada’s retail sales for October which are expected to increase, potentially strengthening the ‘Loonie’.

However, the Canadian Dollar (CAD) has been struggling on a number of levels, with Mark McCormick, the Head of Northern American FX Strategy at the investment bank TD Securities, commenting:

‘The Loonie has to contend with plummeting risk sentiment, soggy oil prices and Trump's [never-ending] blasting of the Fed on Twitter. These forces offer conflicting signals for risk currencies like the Loonie.’

GPB/CAD Outlook: Brexit and Global Economic Uncertainties Remain in Focus

The GBP/CAD exchange rate is likely to be dictated by political forces in the coming weeks with increasingly slim data releases over the Christmas period.

Brexit will remain in the spotlight for many GBP investors, with the focus being primarily on Theresa May as she attempts to bolster support for her Brexit withdrawal agreement ahead of the vote in the New Year.

CAD investors, meanwhile, will be paying close attention to global economic uncertainties, with increasing worries over relations with China leaving many ‘Loonie’ investors to remain cautious.

Tomorrow will see the release of the UK’s Q3 GDP figures which are expected to remain static.

These will be followed by the public sector net borrowing figures for November which are expected to decrease to £7.050bn against last month’s £7.956bn.

The ‘Loonie’ may find a leg-up with the printing of Canada’s GDP figures for October tomorrow which are expected to increase.

As the holiday season fast approaches, the GBP/CAD exchange rate will remain sensitive to any sudden political developments.

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