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GBP to CAD Exchange Rate Fluctuating on US Trade Tensions and Mixed Canadian Data

June 3, 2019 - Written by David Woodsmith

While the Pound slipped against many major currencies last week, the British Pound to Canadian Dollar (GBP/CAD) exchange rate was able to avoid significant losses due to various factors like trade and Canadian growth dampening market demand for the relatively risky trade-correlated Canadian currency.

Instead, GBP/CAD opened the week at the level of 1.7084 and spent most of the week fluctuating as both currencies weakened and remained unappealing. GBP/CAD failed to touch any notable highs or lows, and closed the week near the level of 1.7095.

This week so far has largely been a continuation of last week’s mixed movement, with GBP/CAD having already hit highs of 1.7131 and lows of 1.7035.

At the time of writing today, GBP/CAD was trending closely to the level of 1.7072. The pair has been unable to sustain gains due Brexit and political jitters hitting Sterling, while the Canadian Dollar is weakened by ongoing US trade concerns.

GBP Exchange Rates Struggle as UK Manufacturing Falls into Contraction

The Pound has continued to be among the weakest major currencies in recent weeks, only avoiding major losses versus the Canadian Dollar last week due to the ‘Loonie’s own weakness.

This has been due to worsening concerns about UK politics and the Brexit process.

As Britain’s ruling Conservative Party performed poorly in May’s EU elections and UK Prime Minister Theresa May is set to step down from her leadership over the next month, both political and Brexit fears have deepened.

Concerns are rising that May could be succeeded by a hard Brexit supporter, or that the party as a whole is more likely to support a hard Brexit due to the poor performance in the EU election.

On top of persistent political uncertainties, the Pound was put under additional pressure by this morning’s UK manufacturing PMI, which unexpectedly printed a contraction.

The figure was expected to slow from 53.1 to 52, but instead fell into a contraction of 49.4.

The fall in manufacturing was caused by factories pulling back in activity after stockpiling earlier in the year. According to Seamus Nevin, Chief Economist at Make UK:

‘The extent to which stockpiling was artificially boosting output earlier in the year is now clear with the PMI plunging into negative territory for the first time since the Referendum. Manufacturers are reporting export demand is weakening as customers look to buy goods from other countries which they once bought from the UK.’

CAD Exchange Rates Remains Unappealing amid Trade Concerns and Mixed Data

The Canadian Dollar has been unable to capitalise on the Pound’s latest weakness, as fresh concerns about trade tensions from the US, as well as the health of Canada’s economy, weighed on the Canadian Dollar’s appeal.
Analysts are concerned that the implementation of the new US-Mexico-Canada trade deal could be undermined in some way, due to news that US President Donald Trump has threatened to impose tariffs on all Mexican goods.

Economists fear this could influence Canada’s economy as well, despite the nation not being involved in this latest dispute.

On top of fresh trade uncertainties, the Canadian Dollar’s appeal has been limited by last week’s Canadian growth data, which fell short of expectations in the year-on-year print.

Still, despite this, signs of stronger than expected growth in March supported the Bank of Canada’s (BoC) cautiously optimistic outlook and made investors hesitant to go too bearish on the Canadian currency.

GBP/CAD Exchange Rate Forecast: Strong Canadian Trade and Job Stats Could Boost CAD Support

With no-deal Brexit fears returning and the UK Conservative Party leadership contest heating up, Pound movement is likely to remain focused on political developments and is unlikely to have much reason to climb.

The Canadian Dollar, on the other hand, could become more appealing over the coming sessions if there are fresh signs of resilience in Canada’s economic activity.

If Canada’s economy has been performing better than expected, investors will remain confident that the Bank of Canada (BoC) will hike Canadian interest rates further.

Canadian labour productivity data on Wednesday, followed by trade balance data on Thursday and May’s key job market report on Friday are most likely to be influential to Pound to Canadian Dollar exchange rate investors.
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