The Pound dropped to its lowest rate against the Canadian Dollar since mid-2013 at the start of this week, owing to an extreme level of investor concern about an upcoming speech from Prime Minister Theresa May.
For Canadian Dollar investors, the main point of focus has been whether the incoming US President will be a positive or negative influence on Canadian trade.
Last week, the Pound Canadian Dollar exchange rate dropped from a starting high of 1.62 to a low of 1.59 on Friday.
Pound Sterling Crash Triggered by ‘Hard Brexit’ Bets
A new week of trading brought fresh losses for the Pound as economists and observers unified their forecasts for Tuesday’s speech from Theresa May.
While May could still state that EU single market access will be aimed for during Brexit negotiations, the general conclusion is that the PM will instead be aiming for a ‘Hard Brexit’, which sees single market access lost at the gain of greater control over immigration.
This prospect has shattered demand for the Pound and led many to see a messy, painful extraction from the EU as the only remaining course of action for the UK and its negotiators.
Canadian Economists Focused on Trump’s Trade Plans
With little direct Canadian data out yet this week, the Canadian Dollar has been instead influenced by forecasts for future Canadian trade in relation to a Donald Trump administration.
The primary concern, as voiced by McKinsey and Co Global Managing Director Dominic Barton, has been that Canada may struggle to build business links with the US given Trump’s talk of keeping everything domestic.
Barton has stated that;‘If something does happen [to trade] … then I think we’re going to have to be ready to go back to the table … you think about budgets or you think about tax cuts’.
GBP/CAD Exchange Rate Forecast
This week, Pound/Canadian Dollar exchange rate movement may occur as a result of Tuesday’s UK inflation rate stats, as well as Theresa May’s highly-anticipated speech.
Other UK news includes Wednesday’s jobs figures (jobless claims, unemployment rate and earnings), as well as Friday’s retail sales stats.
For Canada, the biggest news will come on Wednesday and Friday with the first Bank of Canada (BOC) interest rate decision of the year and retail sales/inflation rate stats.
In terms of the UK announcements, inflation is set to rise in December, while jobless claims and earnings including bonuses are also set to increase. Overall unemployment has stagnation at 4.8% on the cards.
Ending the UK’s week, annual retail sales in December are expected to rise significantly. Such results would usually be Pound supportive, but if PM Theresa May strikes a dovish tone on Tuesday not even upbeat UK stats are likely to help lift the Pound.
The BOC is set to leave interest rates untouched at 0.5% on Wednesday, while Canadian consumer spending is expected to have slowed on Friday. The overall inflation rate is due to rise annually, but remain negative on the month.