Pound Canadian Dollar Forecast: GBP/CAD Exchange Rate in Retreat as Trade Tensions Ease

GBP/CAD Exchange Rate Slumps as Markets Reflect on Brexit Progress

The Pound Canadian Dollar (GBP/CAD) exchange rate further extended its losses this afternoon as investors take stock of the current state of Brexit talks just a year out from the UK’s official leaving date.

While the Pound has been buoyed by recent progress, as we head into the final stretch of negotiations ahead of the Brexit date on March 29, 2019 there remains a number of hurdles facing negotiators.

This has seen the GBP/CAD exchange depreciate today as investors express doubts on the possibility of talks accelerating in the coming months.

GBP/CAD Exchange Rate Fluctuates as BoE Rate Hike Signals Fail to Support Sterling

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was met by volatility last week as investors reacted to the latest news regarding Brexit and the Bank of England (BoE).

Sterling initially opened the week on a high, with GBP/CAD striking its highest levels since the EU referendum as the UK and EU were able to agree to terms for a Brexit transition period.

However the Pound began to trend lower again at the tail end of the week as the BoE’s hints at a May rate hike failed to lift the currency on suggestions it had already been priced in by markets.

Meanwhile, while the Canadian Dollar suffered in the first half of last week due to reduced market risk appetite, CAD was able to rebound strongly in the latter half of the week thanks to a sharp uptick in domestic inflation.

The jump in inflation helped to boost speculation about a possible rate hike from the Bank of Canada (BoC) in the coming months, and allowed the Canadian Dollar to exploit the weakness in the Pound exchange rate.

Canadian Dollar (CAD) Ticks Higher as Trade Optimism Bolsters BoC Rate Hike Speculation

After strengthening in overnight trade the Canadian Dollar continues to punch higher against the Pound this morning, amid an easing of global trade tensions.

This comes as Chinese officials pledged to open up markets to US companies as part of a move to expedite trade discussions with the US, something that appears to have alleviated concerns a trade war may have been imminent.

Analysts are hopeful that the reduced fears of a trade war could further bolster the prospects of a rate hike from the BoC sometime in the foreseeable future.

Colin Cieszynski, chief market strategist at SIA Wealth Management said:

‘We are seeing a general easing of the trade risk component in the market place, and that’s starting to help the Loonie. If you do see the trade risk start to ease in the Canadian Dollar then you will likely go back to speculation as to when will the Bank of Canada start raising rates again.’

Sterling (GBP) Plummets; Losses to be Short Term?

Meanwhile the Pound is on the defensive today as end-of-month trading prompts a correction in markets.

With little impactful data to help bolster Sterling sentiment this has seen a heavy sell-off of GBP across the board, with the Pound having retreated against all its major peers.

However analysts stress that the decline is likely to be short-lived with the GBP exchange rate likely to quickly stabilise and possibly rally as soon as there is any positive economic news or developments regarding Brexit.

GBP/CAD Forecast: CBI to Report Uptick in UK Retail Activity?

Looking ahead the GBP/CAD exchange rate may attempt to rally on Wednesday following the release of the Confederation of British Industry’s (CBI) distributive trades survey.

Economists forecast that the index will show retailers enjoyed a rebound in activity in March, possible helping to strengthen the Pound.

Meanwhile Canada will publish its latest GDP figures later this week, with the Canadian Dollar likely to tumble if domestic growth remained subdued at just 0.1% in January, as forecast.

Luke Trevail

Luke studied Journalism at university but quickly moved into the financial sector, initially working in retail banking before joining TorFX in 2007. As a Senior Account Manager Luke assists in overseeing the management of the company’s exposure to currency volatility. He uses his years of foreign exchange experience to produce regular news updates exploring the latest currency movements.

Contact Luke Trevail