The Pound to Canadian Dollar exchange rate briefly dipped on Monday due to an increase in risk-sentiment.
However, the risk-rally was short lived and the Canadian Dollar was weakened on Tuesday, allowing GBP/CAD to rise to a new 2017 high of 1.73.
Pound (GBP) Firm Despite Mixed UK Data
The Pound has held onto last week’s massive UK election-inspired gains despite recent UK data that hasn’t exactly filled investors with confidence.
On top of last week’s report that UK retail sales had slumped in March, this week’s business optimism data from CBI and government borrowing figures both came in much worse than predicted.
In its latest factory report, CBI noted that demand for UK exports is high due to the Pound’s low value, but businesses are not optimistic about the second quarter of 2017.
Tuesday’s public sector net borrowing results indicated that the government borrowed much more than expected in March, with the figure coming in at £-4.36b rather than the projected £-1.5b.
However, Sterling may have benefitted slightly from news that the 2016⁄17 financial year saw the lowest government borrowing since the financial crisis.
Canadian Dollar (CAD) Weakens on US-Canada Tariff Concerns
A brief surge of risk-appetite following the weekend’s French election news was not enough to give the Canadian Dollar a boost, as the risky ‘Loonie’ weakened again on Tuesday.
The latest ‘Loonie’ loss comes after US Commerce Secretary Wilbur Ross stated that he will impose new tariff duties on Canadian lumber, particularly softwood imports.
News that duties would now average as much as 20% dampened demand for the Canadian Dollar and indicated that the US Trump administration would continue to crack down on trade.
Prices of oil, Canada’s most lucrative commodity, have been unable to offer the ‘Loonie’ much support. While oil prices improved slightly on Tuesday, an increasing number of forecasters are arguing that the commodity won’t see any long-term improvements any time soon.
GBP/CAD Forecast: Growth Data Ahead
The Pound to Canadian Dollar exchange rate is unlikely to see any significant shifts on Wednesday or Thursday, unless market risk-sentiment changes in some way.
If US President Donald Trump goes into any detail on his rumoured tax plans or comes down harder on US-Canada trade, the Canadian Dollar could weaken.
Overall though, the Pound to Canadian Dollar exchange rate held most of its recent gains due to heightened GBP demand in the wake of last week’s election announcement.
Friday will see the publication of Britain’s preliminary Q1 Gross Domestic Product (GDP) results, which are estimated to improve from 1.9% to 2.2% year-on-year but slow from 0.7% to 0.4% quarter-on-quarter.
Better-than-expected UK growth data could take GBP/CAD higher later in the week.
The Canadian Dollar could be bolstered on Friday if Canada’s February GDP results beat expectations. Yearly growth is expected to have risen from 2.3% to 2.6% in February, but a better result could cause GBP/CAD to slip from its highs.