The Pound Canadian Dollar exchange rate was trending at an eight-month high of 1.72 yesterday after Tuesday’s shock announcement that a UK general election will take place on the 8th of June.
Surprise UK General Election Announcement Pushes GBP CAD Exchange Rate to Fresh 2017 Best
The Pound Canadian Dollar exchange rate originally hit its eight-month high on Tuesday after Theresa May unexpectedly announced a snap general election for June 8th.
The move has been viewed as an attempt to capitalise on the Conservatives’ vast lead over Labour in opinion polls, with the Prime Minister hoping to return to power with the backing of the British people and a stronger majority.
Markets believe this could actually result in a more favourable ‘Brexit’, as a larger majority could increase the number of pro-EU, or at least moderate Leaver, Tory MPs on the benches.
This would dilute the influence of the hard-line Brexiters on the backbenches, enabling the Prime Minister to pursue a less extreme version of Brexit than the one she has targeted in order to appease her party.
Morgan Stanley claimed yesterday that this has reduced the risk of a ‘disorderly Brexit’, noting:
‘In the base case the UK government would have the Parliamentary majority to push through difficult decisions to seal a deal. In addition, the next Parliament should have time to complete Brexit negotiations before the next scheduled UK election in June 2022.’
OPEC Promise to Keep Fighting Oil Oversupply Fails to Stem Canadian Dollar Losses
The Canadian Dollar had weakened on Tuesday after the latest data suggested US shale oil output was set to hit a two-year high this month.
Investors pulled out of crude and the ‘Loonie’ on the expectation that increased US output would counteract the positive effect on oil prices from an OPEC deal to cut production.
While OPEC yesterday reaffirmed that it is committed to reducing oil production in order to help curb the global oversupply, investors remain worried.
‘It seems that the optimism in the oil market we have seen since the last few days of March is running out of steam,’ said PVM Oil Associates analyst Tamas Varga.
Additionally, US crude inventories declined by less than forecast, indicating demand for crude would remain weak in the near-term.
This kept the Canadian Dollar on the decline, even if oil prices were holding steady after Tuesday’s losses, allowing GBP CAD to record further bullish gains.
GBP CAD Exchange Rate Forecast; Mark Carney Speech to Distract Investors from Election?
Markets may be intensely focussed on June 8th over the next few weeks, making it possible domestic UK data might have a lesser impact upon GBP CAD than previously.
That being said, today’s speech from Bank of England (BoE) Governor Mark Carney could cause turbulence if he references monetary policy.
Additionally, tomorrow’s retail sales figures will further round out the picture of consumer activity in the first quarter.
Meanwhile, Canadian inflation data tomorrow is expected to show slowing price growth, which could help the Pound to a new 2017 best.
Tuesday’s UK public sector borrowing figures may receive even more scrutiny than usual; parties in the election may use the figures as either a defence of current government policy, or an attack upon it.