October 22, 2019 - Written by John Cameron
STORY LINK Trudeau’s Narrow Election Win Sends Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Lower
Pound Canadian Dollar (GBP/CAD) Exchange Rate Slides as Trudeau Clings to Power
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped on Tuesday morning, and the pairing is currently trading at around CA$1.6925.
The Canadian Dollar edged up against the Pound and held near a three-month high after Justin Trudeau’s Liberal Party clung to power in a narrow election win.
However, Trudeau will now be prime minister of a minority government and will need to rely on a left-leaning opposition party for support.
Commenting on this, director of global markets strategy at Cambridge Global Payments, Karl Schamotta said:
‘This is likely to exert drag on a Canadian Dollar that might otherwise ride solid economic data, favourable interest rate differentials, and improving risk appetite higher.’
Sterling (GBP) Slumps Ahead of Crucial Brexit Votes
The Pound was left under pressure on Tuesday as investors were left waiting for this evening’s vote which will determine whether the UK will leave the EU by the end of the month.
Prime Minister Boris Johnson is set to face two crucial votes on Brexit, one on his Withdrawal Agreement Bill and the second on parliament’s timetable for approving the legislation.
While Sterling slumped against the ‘Loonie’, the pairing remained close to levels not seen since June as markets believed the UK was unlikely to crash out of the European Union.
Commenting on the likely movement of Sterling, Thu Lan Nguyen, FX strategist at Commerzbank said:
‘The downside risks for Sterling are rather limited at this point, and a no-deal Brexit seems rather unlikely.
‘Even if parliament doesn’t pass the bill and we get an extension, Sterling will stabilise.’
Canadian Dollar (CAD) Rises on Stable Oil Prices
Meanwhile, the oil-sensitive Canadian Dollar rose against the Pound as oil prices steadied on Tuesday thanks to signs of US-China trade progress.
An optimistic US President Donald Trump caused an upswing in risk appetite, which was further buoyed by comments from White House advisor, Larry Kudlow.
Kudlow added that the trade tariffs scheduled for December could be withdrawn if progress was being made in discussions.
Risk appetite was further bolstered on Tuesday after China’s Vice Foreign Minister Le Yucheng said progress was being made towards the ‘Phase One’ US-China trade deal.
Speaking on Tuesday, Le stated:
‘As long as we respect each other and seek equal cooperation, there are no disagreements that cannot be resolved between China and the United States.
‘What China wants is to deliver a better life for the Chinese people. We don’t want to take anything from anyone else. There’s no such thing as China replacing anyone or threatening anyone.’
Pound Canadian Dollar Outlook: Will Brexit Optimism Bolster GBP?
Looking ahead to this afternoon, the Canadian Dollar (CAD) could edge down against the Pound (GBP) following the release of the Canadian retail sales data.
If August’s sales do not rise as high as expected, it could dampen sentiment in the ‘Loonie’.
Meanwhile, it is likely Brexit will remain the main catalyst for movement in Pound exchange rates over the course of the week.
If MPs vote in favour of the Prime Minister’s deal this evening, it is likely this will provide Sterling with an upswing of support and cause the Pound Canadian Dollar (GBP/CAD) exchange rate to rise.
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TAGS: Pound Canadian Dollar Forecasts