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GBP to CAD Exchange Rate Continues Rebound from Worst Post-2017 Levels amid UK Data

July 18, 2019 - Written by Tim Boyer

While the British Pound to Canadian Dollar (GBP/CAD) exchange rate is still trending lower this week, the Canadian Dollar’s bullish run appears to have run out of steam. Some mixed Canadian data and oil price news is keeping the ‘Loonie’ from rallying further, and this is making it easier for a Brexit battered Pound to recover from its worst levels in over a year versus the Canadian currency.

Thus far, GBP/CAD looks on track to see yet another week of losses. GBP/CAD has been falling almost solidly since May, and while last week’s movement was mixed, this week has already seen GBP/CAD plunge from its opening levels of 1.6384 to briefly touch on a fresh 2019 low of 1.6163.

Tuesday’s 2019 low was the worst level since 2017 for GBP/CAD. Since them, GBP/CAD has been rebounding, but its recovery has been fairly modest compared to its losses, and the pair trends closer to the level of 1.6277 at the time of writing on Thursday morning.

GBP Exchange Rates Supported by Stronger Retail Data amid No-Deal Brexit Fears

It’s been a bearish week for the Pound so far, but as the British currency hit its worst levels all year against many major rivals, investors have been buying it back from its cheapest levels today.

Following days of sharp losses as markets price in the rising possibility of a no-deal Brexit outcome, the Pound has been rebounding.

The Pound’s rebound has been supported by some fresh UK data and political speculation as well.

This morning saw the publication of Britain’s June retail sales results, and both monthly and yearly prints came in well above expectations.

Monthly retail sales jumped to 1.0% rather than coming in with the expected contraction of -0.3%. The year-on-year figure rose to an impressive 3.8%, well above the forecast 2.6%.

On top of this data, speculation that UK Parliament would ramp up efforts to prevent a no-deal Brexit being forced through also offered the Pound some support.

However, the Pound’s potential for gains was limited overall, as no-deal Brexit fears continued to dominate the British currency’s outlook.

A fresh report from the independent Office for Budget Responsibility (OBR) published today also concerned investors, as the group warned that a full-blown recession was possible in the event of a no-deal Brexit.

CAD Exchange Rates Slip Back from Best Levels amid Signs that Rally is Cooling

The Canadian Dollar has been one of this year’s strongest performing major currencies, and the trade-correlated currency has been boosted higher by a strong combination of factors over the past few months especially.

Stronger than expected Canadian data, stronger oil prices, hopes for global trade tensions to lighten, and bets that the Bank of Canada (BoC) will not follow its peers in taking a more dovish tone, have all kept the Canadian Dollar appealing.

However, this week seems to have seen the Canadian Dollar rally starting to cool, for now.

As prices of oil, Canada’s most lucrative commodity, have weakened this week, this has put pressure on the trade-correlated Canadian Dollar.

Canada’s latest inflation rate was underwhelming as well, with the core June figure unexpectedly slowing to just 2.0% - the Bank of Canada’s target.

Analysts are predicting that after a strong few months, Canada’s economic activity could begin to normalise. This has led to expectations that the Canadian Dollar’s strong streak could soon come to an end.

GBP/CAD Exchange Rate Forecast: Canadian Ecostats Could Cause Further CAD Strength

While the Canadian Dollar’s rally appeared to be fading on Thursday morning, key Canadian data will remain in focus for Pound to Canadian Dollar exchange rate investors until the end of the week.

Canadian employment change data from ADP will be published today, followed by May’s key retail sales data tomorrow.

Retail sales are typically a highly influential Canadian dataset. Retail sales are expected to have accelerated to 0.3% month-on-month.

If they fall short of expectations, hopes for Canada’s economic outlook may weaken and this would weigh further on Bank of Canada (BoC) interest rate hike bets.

Canadian Dollar investors will be focused on key Canadian data, but Pound traders will be more interested in political developments towards the end of the week.

Any surprising news in UK politics or Brexit could cause some sharp movements in the Pound, and the Pound to Canadian Dollar exchange rate.
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