After plummeting to a multi-year low against the Canadian Dollar in the immediate aftermath of the UK’s decision to Brexit from the UK, the Pound has stabilised somewhat, although GBP/CAD did ease lower on Monday as Britain published some disappointing construction data.
The Canadian Dollar, meanwhile, has been performing comparatively well with rising commodity prices lending the ‘Loonie’ support.
During the past week, the first in the wake of the decision for the UK to leave the EU, the Pound reached a high of 1.7575 against the Canadian Dollar before falling to a low of 1.7111.
Pound Losses Tempered Despite Construction News
After careening lower since June 23rd the Pound’s downtrend has eased. Sterling remained steady against most of its peers on Monday with a minor decline against the Canadian Dollar representing one of only a few dips for the UK currency.
This positivity is thought to be due to last week’s announced measures by the Bank of England (BoE) for combatting ‘Brexit’ instability, which include cutting the UK interest rate and expanding quantitative easing. While undeniably not beneficial to all components of the national economy, these measures nonetheless show that the BoE is remaining active in managing the nation’s finances.
In less supportive news, the UK’s June construction PMI has dived from 51.2 to 46, falling from growth into contraction. In addition, Chancellor George Osborne has controversially announced that he will be cutting corporation tax to under 15% in a bid to increase overseas investment in a more economically unstable UK.
Canadian Dollar Stable as Plans for Oil Pipeline Hit a Rut
The ‘Loonie’ has been a comparatively stable investment of late, although the future of the nation’s crucial oil production and exportation industries remains in question after the latest political developments.
While 2014 saw the approval of the Enbridge Northern Gateway pipeline, a transport measure to rapidly send oil to Canada’s west coast where it could be loaded onto tankers, more recent developments have seen this decision overturned due to a lack of consultation with aboriginal communities.
While not crippling for Canada’s oil industry, the decision is nonetheless being seen as a step back, rather than a step forward, when it comes to producing and shipping ‘black gold’ out of Canada.
The current appeal of the ‘Loonie’ likely stems from commodity costs; crude oil and gold have both gained in price over the past few days.
GBP/CAD Exchange Rate Forecast
For the current week, Pound Sterling/Canadian Dollar exchange rate movement may occur as a result of the UK’s services PMI for June, the Bank of England (BoE) financial stability report and the UK’s trade balance – which is due on Friday.
Canada’s contributions will consist of Wednesday’s trade balance stats, Thursday’s Ivey PMI and Friday’s jobs data for June.
In the UK’s case, services are forecast to rise marginally while the current trade deficit is expected to widen.
From Canada, a reduction is on the cards for the trade deficit, the Ivey PMI is expected to climb out of contraction and despite rising employment, the unemployment rate itself is predicted to remain at 6.9%.