Ongoing Brexit concerns and the near-collapse of a Canada-EU trade deal years in the making kept the Pound to Canadian Dollar exchange rate moving dramatically during the past seven days.
GBP CAD Fluctuates as GDP Fails to Impress and Nissan’s UK Commitment Raises Questions
Markets were unimpressed by the latest UK GDP figures, despite the data showing stronger-than-expected post-Brexit growth. However, breaking down the data revealed that the economy’s upward momentum in the third quarter was fuelled entirely by the service sector, with all other industries in contraction or stagnation.
Issues surrounding carmaker Nissan were a key driver of Pound exchange rate movement over the last week. The company announced it would continue manufacturing in the UK despite the Brexit vote, although markets were more concerned over what the UK government had been forced to offer to persuade it to do so.
The Pound has fallen today due to worries that the recent criticisms of Mark Carney by prominent political figures could motivate him to leave his post as Governor of the Bank of England (BoE). Theresa May claimed at the latest Tory party conference that loose monetary policy was helping the wrong people and damaging the economy. However, converse speculation that the Governor could announce his intention to stay for the full eight year term – departing the BoE in 2021 – is preventing the Pound from making severe losses today.
Canadian Dollar Rocked as CETA Comes Close to Collapse
News of the near-collapse of a vital trade deal between Canada and the EU kept the Canadian Dollar unsettled last week. The Comprehensive Economic and Trade Agreement (CETA) seemed to have fallen at the final hurdle on Monday due to disagreements amongst regional Belgian authorities. With all other member states supporting the deal, Belgian Prime Minister Charles Michel was forced to announce he could not approve CETA as his regional governments vetoed the notion.
However, the Canadian Dollar has received a minor boost today after frantic work last week by EU officials managed to secure the support of the dissenting Belgian authorities. The deal has been officially signed today.
CETA was not just of interest to Canadian and EU parties; it was closely watched in the UK as well. The process has caused some alarm among markets and economists in Britain due to the complexity and duration of negotiations. The fact a tariff-free arrangement was secured will have boosted hopes for the UK; the fact it took at least two-and-a-half times longer than the timescale for Brexit negotiations will not have.
Pound to Canadian Dollar Forecast; Canadian GDP to Spark Volatile Movement
While the UK Markit manufacturing, construction, services and composite PMIs are due over Tuesday, Wednesday and Thursday, the approach of the BoE’s next interest rate decision could keep markets distracted from domestic data. Making this ‘Super Thursday’ – which sees policy decisions accompanied by the latest Inflation Report – even more significant will be the fact investors will be expecting clues on Mark Carney’s future as Governor.
Tomorrow sees the release of Canadian gross domestic product figures for August. Monthly GDP is predicted to have weakened from 0.5% to 0.2%, while yearly growth is expected to continue at July’s 1.3% pace. The monthly slowdown will likely worry investors, although a consistent pace of yearly expansion may temper the blow.
Unemployment figures on Friday could weaken the Canadian Dollar, as forecasts are for -15,000 jobs to have been lost from the economy.