The Pound Canadian Dollar (GBP CAD) exchange rate continues building on the gains made at the end of last week’s session as Brexit optimism supports GBP.
Pound Exchange Rates Firm as PM Hails ‘Important Progress’ in Brexit Talks
Sentiment towards Pound Sterling (GBP) exchange rates remained upbeat at the start of this week as Prime Minister Theresa May suggested that ‘important progress’ was made during last week’s EU summit.
This also comes despite media reports in Germany that the PM had ‘begged for help’ when she met with the EU Commission president, Jean-Claude Juncker dinner last week, something that Juncker fervently denied.
May spoke in the House of Commons yesterday to say that she had a ‘degree of confidence’ that enough progress was being made in negotiations to allow for trade talks to get underway by the end of the year.
To this end the PM confirmed that there would be no ‘physical infrastructure’ on the border in Northern Ireland, one of the major points of contention that the EU wished to solve before talks would move to the second stage.
Canadian Dollar Weakens Ahead of BoC Meeting
After an abysmal Friday, the Canadian Dollar has found itself still on the back foot in advance of the Bank of Canada (BoC) latest rate decision on Wednesday.
After two rate hikes in as many months, the BoC has certainty become more hawkish of late.
However most analysts suggest that the BoC is likely to change its tune tomorrow in the wake of a lacklustre consumer spending report, which saw retail sales plummet from 0.4% to -0.3% in August.
Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets said;
‘The more we’re ticking down to the Bank’s meeting, the more I think people are worried about whether the Bank will sound a little dovish. That’s keeping the Canadian dollar soft.’
Observers also suggest that with the recent two rate hikes the BoC has a little more breathing room, allowing the bank to wait and watch how Canada’s economy will adjust to the latest policy changes.
GBP CAD Forecast: UK Year-on-Year GDP to Slide?
Looking ahead, the GBP CAD exchange rate may be forced to cede some of its recent gains on Wednesday as the ONS publishes the UK’s latest GDP estimate.
Economists forecast that the figures will reveal that the UK’s year-on-year growth will have slowed in the third quarter, likely leading to a dip in Sterling sentiment tomorrow.
Meanwhile, the focus for Canadian Dollar investors tomorrow will of course be the BoC’s latest rate decision. While interest rates may be left untouched, analysts suggest that the bank may upgrade its GDP and inflation forecasts – moves that would be CAD positive.