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GBP to CAD Exchange Rate Slips amid Fresh Brexit and Bank of Canada (BoC) Speculation

August 29, 2019 - Written by Tim Boyer

Despite uncertainty over the sort of stance the Bank of Canada (BoC) will take at its September policy decision next week, the British Pound to Canadian Dollar (GBP/CAD) exchange rate has failed to hold much of a recovery. The Canadian Dollar is benefitting from global risk-sentiment, as well as speculation that the BoC will have little reason to become more dovish, but upcoming Canadian growth data could prove highly influential.

Since opening this week at around the level of 1.6300, GBP/CAD has fluctuated between lows of 1.6169 and highs of 1.6350 but has generally trended lower. At the time of writing on Thursday, GBP/CAD trends at around the level of 1.6197, just around a cent below the week’s opening levels.

The Pound is being pressured by the latest no-deal Brexit fears, while the Canadian Dollar benefits from a mixture of trade speculation and Bank of Canada (BoC) hopes

GBP Exchange Rates Slump as Britain’s Latest Parliament Suspension Worsens No-Deal Brexit Panic

The Pound fell against most major currency rivals today, as investors continued to digest yesterday’s Brexit news.

Britain’s new Prime Minister Boris Johnson has not had to face the scrutiny of other MPs for his Brexit plans during most of his time in office so far, as UK Parliament has been on its summer recess.

What’s more, Parliament is set to be suspended once again for most of September and almost half of October, due to Johnson’s plans for the timing of the Queen’s Speech.

It is normal for the Queen’s Speech to be held under a new government, but Johnson has requested the preparation time for the speech be a considerable five weeks, lasting from the 9th of September until the 14th of October.

The extended suspension time for Parliament leaves MPs with even less time to attempt to prevent a no-deal Brexit, which Johnson has continuously indicated he will aim for if the EU does not agree to his demands to remove the Irish backstop from the EU withdrawal plan.

According to Lee Hardman, Currency Analyst at MUFG:

‘This price action reflects concerns that the little time that remains for parliament to attempt to block a no-deal Brexit, will now be even shorter,’

CAD Exchange Rates Sturdy on Speculation Bank of Canada (BoC) Will Avoid Dovishness

Due to a combination of factors including a global growth slowdown, the US-China trade war, and rising fears of a possible global recession, bets that the Bank of Canada (BoC) will cut Canadian interest rates over the next year have risen.

Previously one of the banks seen as taking a more hawkish stance even as other banks became dovish, the BoC has seen more pressure too in recent months.

Many forecasters and banks have increasingly predicted that the BoC could signal an October interest rate cut during its September policy decision next week.

However, some analysts such as those at the National Bank predicted that the BoC will continue to signal that it has little reason to cut interest rates. According to National Bank Finance Deputy Chief Economist Matthieu Arseneau:

‘Unless the trade conflict between the Unites States and China escalates further, there is no need for monetary stimulus in Canada’

GBP/CAD Exchange Rate Forecast: Key Canadian Data Could Influence BoC Bets

Next week is set to be a major one for Canadian Dollar movement, with the Bank of Canada’s (BoC) September policy decision and other major Canadian datasets due for publication.

However, the Canadian Dollar may see some late-week shifts in movement tomorrow as well, as Canada’s Q2 growth rate report will be published.

Canadian growth is expected to have slowed to 0.1% month-on-month in June, but the yearly growth rate is expected to have improved to a solid 3.0% quarter-on-quarter.

If Canadian growth beats forecasts, speculation of a more dovish Bank of Canada (BoC) could soften and the Canadian Dollar would strengthen.

Of course, weaker growth data would have the opposite effect and BoC interest rate cut bets would rise.

The Pound could also see some late-week developments. Investors are becoming more anxious about a possible no-deal Brexit, and speculation that the Britain’s opposition MPs could force a general election will also keep the Pound to Canadian Dollar under pressure.
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