The Pound to Canadian Dollar exchange rate experienced brief, but fairly dramatic, fluctuations during Monday’s trade session as comments from the Governor of the Bank of Canada (BOC) confused markets. However, GBP CAD swiftly returned to the week’s opening levels as Brexit concerns and falling oil prices kept both currencies depressed.
Limp Pound (GBP) Pushed Around by Currency Rivals
Although the Pound has moved away from recent multi-year lows, Sterling remains weighed down by ongoing concerns about Britain’s access to the European Union’s single market and to what extent the UK will be able to maintain access following the conclusion of the formal Brexit process – set to begin in early 2017.
These larger issues have resulted in GBP becoming decoupled from domestic data to a certain extent.
The Pound has trended largely flatly since last week’s news that MPs are likely to be given a vote on the final terms of a Brexit deal towards the end of negotiations.
Canadian Dollar (CAD) Weak on Slipping Oil Prices and BOC Confusion
After performing strongly throughout much of October as oil prices continued to rise on expectations of an output cap deal from OPEC, the Canadian Dollar’s performance has been a little more subdued in the last week.
Prices of oil (Canada’s biggest export) have fallen from yearly highs, largely due to some non-OPEC oil producers stating that they would not support an output cap deal, causing markets to worry about whether such a deal could work as hoped.
Monday’s news also caused ‘Loonie’ volatility. Bank of Canada (BOC) Governor Stephen Poloz stated that the bank planned to wait 18 months to act during a speech on Monday.
Initially, this sent the Canadian Dollar surging as investors assumed he meant 18 months of neutrality on monetary policy. However, he later clarified that this was about the output gap rather than monetary policy, and the ‘Loonie’ dropped again, giving up most of its gains.
GBP/CAD Forecast: Quiet Data Week Ahead
The Pound to Canadian Dollar exchange rate could advance over the coming week if prices of oil continue to slip, as risk-sentiment is likely to continue dropping ahead of the US Presidential election.
While this week’s economic calendar is largely quiet, Sterling could solidify advances against the Canadian Dollar on Thursday if Britain’s Q3 Gross Domestic Product (GDP) scores unexpectedly impress.
However, even if UK growth scores beat expectations this doesn’t mean Sterling will surge. With Brexit concerns still weighing on the British currency, it may take a particularly impressive score to drive investors into GBP.