GBP has got off to a fairly poor start to the week, with the currency generally softening due to continuing uncertainty about the future of the post-Brexit UK.
The Canadian Dollar’s small advance against the Pound comes in spite of fluctuating crude oil costs and a recent expansion in the national budget deficit.
Last week saw some turbulence in the Pound Canadian Dollar exchange rate; Sterling started trading at 1.64, rose to 1.66, but ultimately closed trading on Friday at 1.65.
Pound to Canadian Dollar Losses Follow EU Competition Warnings
The Pound’s current relative weakness comes amid concerns about the future economic relationship between the UK and the EU.
In particular, Italian Foreign Deputy Mario Giro has warned that EU member states may try to ‘poach’ City of London financial services after Brexit, due to increased uncertainty among banking institutions about their viability within the UK.
While admitting that Italian officials had hoped for a ‘Soft Brexit’ where the UK remained in the EU single market, Giro was still optimistic, stating that;
‘The process has not started. We have two years’.
Canadian Dollar Influenced by Oil Prices, Expanding Budget Deficit
The Canadian Dollar has managed to make fractional gains against the Pound today, although these came in spite of two recent negative developments.
The first was Friday’s November budget balance report, which saw a major deficit expansion from -1.5bn to -3.32bn. Additional negative news has focused on crude oil costs, which have remained unstable today.
GBP/CAD Exchange Rate Forecast
This week, Pound/Canadian Dollar exchange rate movement may occur as a result of Tuesday’s UK GfK confidence score, UK PMIs and February’s Bank of England (BoE) interest rate decision, due on Thursday.
From Canada, notable news will include a speech from Bank of Canada (BOC) official Sylvain Leduc, a speech on Tuesday from BOC Governor Stephen Poloz and both GDP and manufacturing stats on Tuesday and Wednesday respectively.
In terms of the UK news, confidence is expected to rise on Tuesday but PMI results later in the week have been forecast to fall, which could weaken the Pound against the Canadian Dollar.
The BoE is expected to leave interest rates at 0.25%, so investors will be focusing on BoE Governor Mark Carney’s commentary after the decision; Carney may offer forecasts for the future of the UK economy and could boost the Pound if optimistic.
Looking to the Canadian data, Tuesday’s GDP result is due to rise from -0.3% to 0.3%. If this estimation proves accurate and oil prices start rising again over the course of the week, CAD gains are likely.