Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as UK Public Finances Hit Record Surplus

February 21, 2019 - Written by John Cameron

STORY LINK Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as UK Public Finances Hit Record Surplus

Pound Canadian Dollar (GBP/CAD) Exchange Rate Rises on Record High UK Public Finances Surplus

This morning the Pound Canadian Dollar (GBP/CAD) exchange rate rose by 0.4%, and the pairing is currently trading at an inter-bank rate of CA$1.7248.

Data this morning revealed that public finances hit a record surplus of £14.9B in January due to a surge in income tax payments.

This marked the strongest January since records began in 1993, which puts public finances on a stronger footing compared to last year.

The Pound rose against the Canadian Dollar following the release of this data.

The Pound also gained support from reports that MPs could be given the chance to vote on a revised Brexit deal as soon as next week as discussions in Brussels had been constructive.

Yesterday: UK Politics in the Spotlight as Further MPs Resign

Today the GBP/CAD exchange rate has managed to recover some of the losses recorded yesterday following the news of the resignations of three members of Theresa May’s Conservative Party.

The three MPs, Anna Soubry, Sarah Wollaston and Heidi Allen left the party to join an independent group that has been set up by former Labour Party MPs.

In a letter addressed to the Prime Minister, they wrote:

‘We find it unconscionable that a party, once trusted on the economy, more than any other, is now recklessly marching the country to the cliff edge of no deal.’

However, some traders were encouraged by these resignations, as they believe it will encourage May to show more flexibility in obtaining a new deal and avoiding a no-deal Brexit.

Marshall Gittler, Chief Strategist at ACLS Global stated:

‘I’m not yet ready to turn bullish on sterling, but if more people join the Independent Group, it would be like MPs mutinying against their captains in order to steer the ship away from the iceberg. That could be extremely positive for GBP.’

Meanwhile the Canadian Dollar benefited as the price of oil climbed to its highest level of 2019 so far.

Commenting on the rise in oil prices, Michael Goshko, Corporate Risk Manager at Western Union Business Solutions said:

‘As oil goes, so does Canada. The Canadian Dollar is gaining on the back of stronger oil and a generally weaker US Dollar.’

Additionally, according to recent reports the US and China have begun to draw up memorandums of understanding over trade – bolstering risk appetite in the process.

GBP/CAD Outlook: Will a Dovish BoC Dampen CAD Sentiment?

Likely to remain one of the main catalysts for movement in the Pound Canadian Dollar (GBP/CAD) exchange rate is Brexit.

If there are further signs that MPs could vote on a new Brexit deal next week, it could see the pairing rise.

However, high level trade discussions between the US and China could inspire movement in the risk-sensitive Canadian Dollar before the weekend.

If the talks progress well and there are signs a deal could be reached, or there is further talk about extending the 1 March deadline it could see the GBP/CAD exchange rate slip.

This evening, Bank of Canada (BoC) Governor Stephen Poloz is scheduled to give a speech.

If his tone is dovish, it could cause the ‘Loonie’ to slide against Sterling.

Sentiment for the Canadian Dollar could be dampened following the release of the December’s retail sales, which are predicted to contract for the second month in a row.

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TAGS: Pound Canadian Dollar Forecasts