GBP/CAD Exchange Rate Slips as Brexit Negotiations Stall Once Again
UPDATE: Confidence in Pound Sterling (GBP) diminished once again this afternoon in the wake of reports that Theresa May will reject the EU’s latest Irish border proposal.
This fresh bump in the progress of Brexit negotiations naturally weighed on the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate, raising the odds of a no-deal scenario.
An unexpected uptick in the UK consumer price index was not enough to shore up GBP exchange rates today, especially as investors remain concerned by weak domestic wage growth.
Solid Canadian Manufacturing Sales Data Increases Pressure on GBP/CAD Exchange Rate
UPDATE: Better-than-expected growth in Canadian manufacturing sales helped to push the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate lower this afternoon.
Although sales saw a loss of momentum on the month investors were still encouraged by the data, giving the Canadian Dollar (CAD) an additional boost against its rivals.
If Canadian data continues to print well in the days ahead we could see the GBP/CAD exchange rate shed further ground as market confidence improves.
Escalating Trade Tensions Fail to Boost Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate
News that the US has continued to escalate its trade dispute with China, imposing US$200bn worth of fresh tariffs, was not enough to dent the Canadian Dollar (CAD) for long.
CAD exchange rates instead saw a rebound on Tuesday morning as markets took comfort in the fact that the Trump administration only imposed tariffs of 10% rather than the 25% that had been feared.
This sense of relief allowed commodity-correlated currencies to recover some of their previous losses, even though global growth is still expected to diminish in response to ongoing trade tensions.
With escalating trade tensions likely to hamper US growth the prospect of the Federal Reserve maintaining a more aggressive pace of monetary tightening looks to have faded, to the benefit of the Canadian Dollar.
Dip in UK Inflation to Weigh on GBP/CAD Exchange Rate
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is likely to come under further pressure on Wednesday with the release of August’s UK consumer price index figures.
Investors anticipate a modest slowdown in inflationary pressure on the year, with the headline CPI expected to dip from 2.5% to 2.4%.
If inflation continues to fall back towards the Bank of England’s (BoE) 2% target this would undermine the case for any further monetary policy action in the months ahead.
With the BoE already looking set to sit on its hands for some time to come a weaker inflation rate could leave GBP exchange rates in a bearish mood.
Even if price pressures show signs of picking back up on the month this may not be enough to shore up demand for Pound Sterling in the short term.
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Could Benefit From Easing Canadian Inflation
Friday’s Canadian inflation data may offer the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate a rallying point, however.
Forecasts point towards the annual CPI easing from 3.0% to 2.8% in August, keeping inflation comfortably within the Bank of Canada’s (BOC) target range.
Even so, as the monthly CPI is expected to show a contraction this could dampen the mood towards the Canadian Dollar ahead of the weekend.
A modest rebound in domestic retail sales may offer some support to CAD exchange rates, with market confidence in the underlying health of the Canadian economy already dented.
As mounting global trade tensions place increased pressure on the Canadian economy the appeal of the Canadian Dollar is likely to diminish further.
With the Trump administration maintaining its protectionist stance on trade the prospect of a breakthrough in NAFTA negotiations looks limited, casting further doubt over the domestic outlook.
Easing UK Retail Sales to Increase Pressure on GBP/CAD Exchange Rate
Focus is also likely to fall on UK retail sales data this week as markets anticipate an easing in consumer spending on the month.
As the impact of the summer heatwave and sporting season fades UK consumers are expected to rein in their finances, limiting retail sales growth.
This would not bode overly well for the outlook of the UK economy, which has benefitted from high levels of consumer spending in recent years.
If consumer sentiment show signs of souring this is likely to put further pressure on domestic growth, giving investors fresh incentive to sell out of Pound Sterling.
Jitters over the prospect of the UK leaving the EU without a deal may also limit the potential for Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate gains for some time to come.