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GBP to CAD Exchange Rates Slip from Best Conversions amid Brexit Jitters and Canadian Dollar Resilience

April 4, 2019 - Written by Frank Davies

The Canadian Dollar has had broadly mixed movement in recent weeks, and as a result the British Pound to Canadian Dollar exchange rate has been especially volatile. Brexit uncertainty causes sharp movements, but as market demand for the Canadian Dollar is currently improving the pair may be in for losses unless upcoming Brexit news impresses.

Due to broad Canadian Dollar strength at the end of last week, GBP/CAD tumbled from 1.7730 to 1.7400 throughout the week overall. While Brexit optimism has helped GBP/CAD to rebound strongly this week, the pair has only regained around a cent.

Last week’s Canadian Dollar strength hasn’t completely faded, making it difficult for GBP/CAD to recover all of last week’s impressive losses.

British Pound Sterling Exchange Rates Slip as Brexit Jitters Set in A Week before New Deadline

The EU’s current formal Brexit date is still the 12th of April – which is just over a week away.

The UK is running out of time to find a way to resolve the Brexit process, and there is still no sign of Parliament agreeing to one single solution to the issue.

As doubts rose that a solution to Brexit would be found before the end of the week, Pound investors became anxious and sold the Pound from its best levels this afternoon.

This is despite fresh efforts from Parliament to block a no-deal Brexit, as well as Brexit talks between Prime Minister Theresa May and Labour Party Leader Jeremy Corbyn.

These factors have been the primary reason for the Pound’s strength so far this week, but as the reality that a no-deal Brexit was still possible next week set in, the Pound was sold from its best levels.

Canadian Exchange Rates Resilient amid Recovery from Weak March Performance

About a month ago, Canadian growth data disappointed investors as it indicated the economy had grown just 0.1% in Q4, and had contracted by -0.1% in December.

It wasn’t just Canada seeing slower growth though. In recent months, analysts have been increasingly warning of a global growth slowdown, with some even speculating that a recession may be possible.

Near the end of March, in a fresh sign of concern over the slowing global economy, the US Treasury bond yield curve inverted, and as a result other bond yield curves like the Canadian one inverted too.

As inverted bond yield curves have preceded most recessions, the news spooked investors and led to concerns that a recession could really be on the cards.

This, combined with a lack of any major developments in US-China trade negotiations, as well as rising concerns of more cautious monetary policy in major central banks, meant that the Canadian dollar was weak for much of March.

That said, demand for the Canadian dollar has improved again since the end of March.

Canada’s January growth figures rebounded more than expected from December’s contraction. On top of this, the US and Canadian bond yields have normalised somewhat, offering investors some relief.

Weakness in the US dollar and expectations for a more dovish Federal Reserve, as well as sturdy oil price (Canada’s biggest export) have also made the Canadian dollar more appealing in comparison.

GBP/CAD Exchange Rate Forecast: Data Could Bolster Canadian Dollar amid Brexit Uncertainty

While the Pound will likely continue to be driven by Brexit developments as the next Brexit date approaches next week, how could the Canadian Dollar influence GBP/CAD movement over the next few weeks?

Canada’s growth outlook could improve if Friday’s job market results beat expectations.

Following that, Canadian dollar investors will turn their attention to global factors affecting risk-sentiment and other global market movements, at least until the second half of April.

If US-China trade negotiations go well, or if there are signs that the global economic slowdown is fading, investors may be more willing to take risks and buy the Canadian dollar. Stronger oil prices may support Canadian dollar appeal as well.

Towards the end of April, CAD investors will be closely watching Canada’s latest trade balance, inflation rate and retail sales stats.

These will be followed on the 24th of April by the Bank of Canada’s (BoC) April policy decision, which will provide an updated monetary policy outlook.

If the data is impressive and helps the BoC to take a more optimistic tone, the Pound to Canadian Dollar exchange rate’s potential for gains could be limited over the next few weeks – especially if Brexit uncertainty persists.
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