Update 16:31 BST 23/07/2019:
The Pound (GBP) rebounded a little from its recent lows in profit-taking on Tuesday afternoon, as markets put the uncertainty of the Conservative Party leadership contest behind them.
However, the Pound’s appeal was ultimately limited, and the Pound to Canadian Dollar (GBP/CAD) exchange rate saw mixed movement near the week’s opening levels despite the Canadian Dollar’s (CAD) own weakness on recent disappointing Canadian data.
For now, investors are highly anticipating the rest of the week’s UK political and Brexit developments, which could cause GBP/CAD to fall lower again if they are perceived as worsening the chances of a no-deal Brexit.
Pound to Canadian Dollar Exchange Rate Recoils from Recovery Attempt
Despite the Canadian Dollar (CAD) being knocked lower by some disappointing Canadian ecostats in recent sessions, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has been tumbling again today as UK political jitters hit the Pound (GBP).
Last week saw GBP/CAD tumble from the week’s opening level of 1.6384 to briefly touch its worst levels since 2017 – 1.6167. However, the pair ultimately recovered some losses and ended the week closer to the level of 1.6329.
This week’s movement has been more limited so far. GBP/CAD fluctuated yesterday and briefly attempted to recover due to disappointing Canadian data, but at the time of writing today the pair was trending close to the week’s opening levels.
The Pound’s potential for gains is heavily limited due to no-deal Brexit fears dominating the outlook, but recent Canadian data has been disappointing and this has prevented the Canadian Dollar from holding its best levels.
Pound (GBP) Exchange Rates Unappealing as Brexiteer Johnson Expected to Become UK Prime Minister
The Pound (GBP) remained too unappealing to hold a recovery against a weaker Canadian Dollar (CAD) today, amid broad market expectations that Brexiteer Boris Johnson would become Britain’s next Prime Minister.
Johnson, who has repeatedly indicated he would prefer a no-deal Brexit to another Brexit delay, and has said he would not allow the Irish backstop to be part of any deal, has been seen as a negative for Sterling.
The results of the Conservative Party leadership contest are expected to be announced this afternoon. Fears that they could be accompanied by further Brexit uncertainty and political instability in the Conservative Party are keeping pressure on Sterling.
On top of political jitters, the Pound is being weighed by fresh comments from Bank of England (BoE) policymaker Michael Saunders today.
Saunders indicated that markets should not expect a rate hike from the bank any time soon. Typically a more hawkish policymaker, his dovish comments led to further weakness in Sterling.
Canadian Dollar (CAD) Exchange Rates Rebound from Monday Drop
Following some disappointing Canadian retail sales stats on Friday, yesterday’s Canadian wholesale sales data missed market expectations as well. As a result, the Canadian Dollar (CAD) continued to be sold from its best levels.
The Canadian Dollar had enjoyed weeks of bullish performance until last week’s poor retail data put an end to its rally.
Investors have been selling the currency from its best levels in profit-taking, as speculation rises that the Bank of Canada (BoC) may be pressured into becoming more dovish after all.
According to Michael Greenberg, Portfolio Manager at Franklin Templeton Multi-Asset Solutions:
‘With weaker data potentially creating more expectation in the market for easier policy from the Bank of Canada, I think it’s playing as a headwind to the CAD today’
Until Canadian data started showing more signs of weakness, investors had been betting that the BoC would maintain a more neutral or even hawkish tone on monetary policy.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Could Fall Further despite Weak Canada Data
As this week’s UK and Canadian economic calendars are fairly quiet, the Pound to Canadian Dollar (GBP/CAD) exchange rate may not have much reason to advance as UK politics remain in focus.
The Canadian Dollar (CAD) has been less appealing amid weak Canadian data, but unless Canada’s earnings data disappoints investors on Thursday, the Pound (GBP) may remain less appealing than the ‘Loonue’ overall.
Investors are unlikely to have much reason to buy Sterling unless there are some surprising positive developments in UK politics or Brexit.
With Brexiteer Boris Johnson expected to become Conservative leader today, Sterling may be in for further weakness instead.
Focus on potential developments in politics and how Brexit may unfold under a Boris Johnson government are likely to be the focus for Pound to Canadian Dollar (GBP/CAD) exchange rate investors this week.