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GBP to CAD Exchange Rate Continues to Plummet Into Worst Levels since 2017

July 3, 2019 - Written by James Fuller

The Canadian Dollar remains one of the market’s most appealing major currencies, as Canadian data continues to beat forecasts and the currency climbs on global trade hopes, and as a result the currency has easily pushed a weaker British Pound to Canadian Dollar (GBP/CAD) exchange rate even lower. The Pound saw yet another day of weak performance today as investors digested concerning UK services data.

Due to hopes for the Bank of Canada (BoC) to avoid becoming too dovish, GBP/CAD has seen significant losses over the past couple of months.

GBP/CAD may be on track for another week of consecutive losses following last week’s fall from 1.6830 to 1.6640. The pair has already lost around a cent and a half since Monday, and at the time of writing was trending closely to a 2019 low of 1.6463.

This was also the worst GBP/CAD level since October 2017, showing just how weak the Pound is on Brexit fears and just how strong market expectations for Canadian economic resilience are.

GBP Exchange Rates Tumble amid Fears UK Economy Could See Recession

Concerns that Britain’s next Prime Minister could deliver a worst-case scenario no-deal Brexit have kept significant pressure on the Pound in recent weeks, and jitters are still rising that Britain’s economy is weakening considerably as Brexit uncertainty takes hold.

This week’s UK PMI results from June served as the latest evidence that Brexit uncertainty was having a negative impact on UK economic activity.

Manufacturing and construction PMI stats earlier in the week showed unexpectedly deep contractions, and today’s key services PMI revealed that Britain’s biggest economic sector was also near stagnation.

The report had been predicted to come in at 51, but instead slowed to just 50.2.

The data indicated that UK economic activity had just experienced one of its worst months since the financial crisis.

Analysts warned following the report that Britain’s economy may even have contracted in Q2 2019. According to Howard Archer from EY Item Club:

‘An unwinding of the substantial stockpiling that occurred in the first quarter has clearly weighed on the UK economy in the second quarter, while it has also been hampered by extended Brexit uncertainties, an unsettled UK political situation and a challenging global economic environment.’

Some analysts also expressed concern that the weakness could persist into Q3, and may even lead to a recession if activity does not improve.

CAD Exchange Rates Remain Resilient on Trade and Canadian Economic Hopes

The Canadian Dollar remains one of the market’s more appealing major currencies, as Canada’s economic outlook remains solid and the latest trade developments make the trade-correlated currency even more appealing.

Last week’s key Canadian growth report came in stronger than expected, bolstering the market’s Canadian economic outlook, and this week’s Canadian manufacturing PMI data came in slightly stronger than expected as well.

With Canadian data still showing resilience, markets are speculating that the Bank of Canada (BoC) will avoid the increasingly dovish tonal shifts seen in other major Central Banks lately.

With the BoC still expected to maintain a relatively hawkish tone on monetary policy, the Canadian Dollar has also been supported by the latest trade developments.

Hopes for US-China trade relations to improve, as well as rising prices of oil, are keeping the trade-correlated Canadian Dollar appealing.

GBP/CAD Exchange Rate Forecast: Canadian Data to Keep Driving Movement

While the Canadian Dollar has been supported by Canadian ecostats and global trade developments over the past few weeks, hopes for the Bank of Canada (BoC) to remain fairly hawkish could quickly fade if key Canadian data show signs of weakness.

Multiple key Canadian ecostats will be published over the coming days, with trade balance figures due on Wednesday and job market stats due for publication on Friday.

Hopes that Canadian trade has been resilient have been part of the Canadian Dollar’s appeal, so weak trade data could cause the Canadian Dollar to fall back from its highs.

Poor Canadian job market data on Friday would be particularly disappointing and would weigh on Bank of Canada interest rate hike bets.

As for the Pound, with no-deal Brexit fears continuing to dominate investors will be looking for signs of relief in UK politics.

Without that though, the Pound to Canadian Dollar exchange rate’s potential for gains will be more dependent on Canadian Dollar weakness.
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