GBP/CAD Exchange Rate Side-lined by Brexit Woes
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is trending lower again this morning as Brexit fears continue to undermine Sterling sentiment.
At the time of writing, the GBP/CAD exchange rate is trading at around CA$1.6185, down around 0.3% so far this morning and trading at its lowest levels since October 2017.
Pound Sterling (GBP) Subdued as Robust Inflation Unable to Offset Brexit Concerns
The Pound (GBP) remains on the defensive against the Canadian Dollar (CAD) this morning as Brexit fears continue to drag on market sentiment.
Sterling has fallen heavily so far this week, with the UK currency touching new multi-month lows against many of its peers as markets begin to price in an apparent increased risk of a no-deal Brexit.
This comes as the frontrunner to become the next UK Prime Minister, Boris Johnson plans to throw out the Irish backstop puts him on a collision course with the EU, greatly increasing the chances of the UK falling out of the EU without a deal.
David Lowe, head of international trade at law firm Gowling WLG, explains:
‘A Boris Johnson proposal to scrap the Irish backstop has a high chance of being rejected and not seen by the EU as a good reason. And then the UK risks stepping off into the unknown of a no-deal Brexit on Halloween.’
Meanwhile, the release of the UK’s latest CPI figures appeared to be little more than a blip on the radar for GBP investors, with a steady inflation reading in June not likely to deter the Bank of England from easing its monetary policy later in the year.
Stabilising Oil Prices Lends Support to the Canadian Dollar (CAD)
At the same time, the Canadian Dollar (CAD) was buoyed this morning as the commodity-linked currency was buoyed by the prospect of stabilising oil prices.
After slumping below $60 a barrel in June, so far in July Brent crude has reliably held around $65 a barrel, boosting hopes that the recent volatility in the commodity has begun to fade.
Further lending support to the ‘Loonie’ this morning was the pull back in the US Dollar (USD), which helped to bolster market risk appetite.
GBP/CAD Exchange Rate Forecast: Slide in Canadian Inflation to Soft the ‘Loonie’?
Potentially injecting fresh impetus for movement in the Pound Canadian Dollar (GBP/CAD) exchange rate later this afternoon will be the publication of Canada’s own CPI figures.
Economists forecast that Canadian inflation will have fallen from 2.4% to 2% last month, keeping it within the Bank of Canada’s (BoC) target range but still likely to dent the appeal of the ‘Loonie’ as it increases the chances the BoC could follow other central banks in easing monetary policy in the future.
Meanwhile, the release of the UK’s latest retail sales figures is likely to place even more pressure on Sterling tomorrow as economists forecast that sales growth will have contracted again in June.
Should sales have slumped as expected this will confirm that they contracted through the entire second quarter, stoking concerns the GDP will have contracted in Q2 after the UK’s robust growth in the first quarter was largely attributed to strong consumer spending.