The GBP CAD exchange rate is slipping lower today as election jitters weigh on Sterling, but at 1.7389 the pairing is still over one-and-a-half cents above the lows seen at the beginning of last week.
Crude Oil Turbulence Allows GBP CAD to Gain despite UK Election Jitters
The Pound managed to climb sharply on Wednesday, arriving at the level around which it would hold for the remainder of the week. Despite a poll from YouGov predicting the Conservative Party would be 16 seats short of a majority once the ballots were counted was quickly cancelled out by a Panelbase survey that placed the Tories 15 points ahead of Labour.
Meanwhile, strong Canadian GDP figures were enough to protect the ‘Loonie’ from the slumping crude oil markets. Growth of 0.5% in March, compared to predictions of 0.2%, meant that Canada was the fastest-growing economy of the G7 in the first quarter of the year.
But news Libyan oil production had bounced back after technical issues meant the world’s crude oversupply could be set to get even larger.
Thursday’s UK manufacturing PMI boosted the Pound after falling less-than-expected to 56.7 from 57.3, instead of to 56.5. Although still showing that the pace of growth had inched marginally lower, the sector remained in a strong position, which cheered the markets.
Election jitters were gripping the Pound at the end of last week, with a 17-month high reading from the latest UK construction PMI failing to support the Pound. A new poll by Ipsos MORI revealed that the Conservatives had a five-point lead over Labour; a significant weakening on the 15-point advantage recorded two weeks prior.
GBP CAD was only able to advance thanks to weakness in the Canadian Dollar, with poor trade figures and the US withdrawal from the Paris Agreement on climate change both weighing on the ‘Loonie’.
GBP CAD started yesterday on an uptrend, but most of its gains were lost in the early afternoon and the pair ended the day around 1.7391. The latest UK services PMI disappointed, falling from 55.8 to 53.8 instead of to 55 as predicted. While this boded ill for the UK’s dominant sector, the Pound largely shrugged off the negative implications of the release.
It was oil market strength that allowed the Canadian Dollar to eat into the Pound’s gains; while crude’s gains were temporary, the ‘Loonie’ was able to hold onto its advances. The upsurge was caused by the news that Saudi Arabia, Egypt, the United Arab Emirates and Bahrain had all severed diplomatic ties with Qatar. Speculation that this could disrupt Qatari oil production and therefore lessen the global oversupply boosted demand for crude and so lifted the Canadian Dollar.
Canadian Dollar Edges Up as Markets Await Former FBI Director’s Thursday Testimonial
Today the Pound is slipping below opening levels versus the Canadian Dollar, thanks to uncertainty in the US supporting commodity prices. Former FBI Director James Comey is due to testify before the US Senate intelligence committee on Thursday on the issue of Russian interference in the Presidential Election. This could be a key turning point for the Trump administration; Comey is likely to say that the President pressured him to drop the investigation.
This is weakening the US Dollar and pushing commodity prices – and the currencies that closely track them – higher, boosting the Canadian Dollar.
UK Election Forecast to Keep GBP CAD Soft; Volatility Likely on Friday When Results are known
UK ecostats are unlikely to get much of a look in for the remainder of the week, given that Thursday sees voters head to the polls. Sterling is likely to weaken as the vote approaches, while Friday promises plenty of volatility as the results will probably be known before the London trading session begins.
A positive figure from tomorrow’s Canadian building permits data covering April could help the Canadian Dollar to recover if election fears begin to drag the Pound lower.