The defeat of amendments to the Article 50 bill in the Houses of Parliament yesterday gives Theresa May carte blanche in the Brexit negotiations and the prospect has seen GBP CAD slump.
The Pound Canadian Dollar exchange rate has fallen -0.7% to trade around 1.63 today.
Disappointing UK Spring Budget and Strong Canadian Labour Data Weakens GBP CAD
Last week saw the Pound declining after Wednesday’s Spring Budget, delivered by Chancellor of the Exchequer Philip Hammond.
Markets had been hoping to see some sign that the Chancellor was putting measures in place to deal with the fallout of Brexit, but the rather lacklustre Budget was interpreted as Hammond ‘keeping his powder dry’ for the autumn.
After a sharp recovery on Thursday, GBP CAD weakened on Friday after strong labour market data from Canada showed better-than-expected job creation and an unanticipated fall in the unemployment rate.
15,300 extra people found work in February; a figure made more impressive by the fact -90,000 fewer people were in part time work and 105,100 more people were in full time roles.
The day’s UK data provided little support for the Pound against the Canadian Dollar in the end; trade deficits may have been smaller-than-expected and construction output greater on the year, but industrial and manufacturing production largely disappointed predictions.
Pound Tumbles as Brexit Bill Passes Unaltered Through Parliament
After recovering towards last week’s highs yesterday, GBP CAD exchange rates have now dropped back to near Wednesday’s lows at 1.63.
The fall has been triggered by the defeat of amendments made to the Article 50 bill by the House of Lords, with MPs having voted to overturn both changes by large majorities.
The first of the amendments was to force Theresa May to guarantee the rights of EU nationals currently living in the UK, while the other would have guaranteed Parliament a ‘meaningful vote’ on the terms of Brexit.
The only thing left in the process is for the bill to be granted Royal Assent. This means the triggering of Article 50 is but a matter of days away and this is making markets nervous, causing the Pound Canadian Dollar exchange rate to slump -0.6%.
Canadian Dollar Rises as Oil Losses Stall
The outlook for the oil market isn’t particularly rosy at present, but an end to a week of consecutive losses has helped support the Canadian Dollar higher.
With more data on the way that will help build the picture of global supply, investors are sitting tight, preventing further weakness and allowing prices to edge higher again.
The ‘Loonie’ is finding additional support in an unlikely place; tomorrow’s Federal Reserve monetary policy announcements.
Markets are so confident that the Fed will hike rates tomorrow that they have already priced higher interest rates into the US Dollar and are now taking profit on their gains before the meeting has even finished.
A strong US Dollar hurts the Canadian Dollar as it weakens oil prices, makes exporting across the border less lucrative and importing more expensive.
Therefore, signs that the US Dollar is highly unlikely to rise further are giving investors the confidence to buy into the higher-yielding commodity-correlated Canadian Dollar.
GBP CAD Exchange Rate Forecast; Fed News to Eclipse UK and Canadian Data?
The Federal Reserve announces its latest policy decisions tomorrow.
If nothing unexpected happens, GBP CAD is likely to fall as investors return to the Canadian Dollar; should the Fed prove more hawkish than expected, upgrading the outlook on monetary policy to include three further hikes this year, GBP CAD could rise as skittish investors desert the ‘Loonie’.
The UK releases jobless claims and important wage growth data tomorrow; sluggish earnings figures will further sour appetite for the Pound considering inflation is forecast to continuing rising.