Pound Canadian Dollar (GBP/CAD) Exchange Rate Muted as Labour Back Early Election
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained muted today, leaving the pairing trading at around CA$1.6814.
Sterling remained muted against the Canadian Dollar as investors waited to see if Prime Minister Boris Johnson’s next attempt to push for an early general election would succeed.
The Prime Minister is expected to force a bill through the Commons calling for an election on 12 December requiring a 320 majority rather than the two-thirds majority he failed to secure on Monday.
Meanwhile, opposition leader Jeremy Corbyn revealed the Labour party will support a general election as an extension to Article 50 removes the threat of a no-deal Brexit.
Sterling is expected to strengthen in the event of an election as Johnson’s Brexit deal is likely to pass more easily through parliament.
Commenting on this, Lee Hardman, MUFG currency analyst noted:
‘The expectation is that [Johnson] should be able to get the vote passed in Parliament today for an early election.
‘From our perspective it’s difficult to see where the obvious downside risk for the Pound is.
‘We don’t see the no-deal risk going back to the table any time soon. Even if the government doesn’t do as well [in the election], that would increase the influence of the opposition parties who want an even softer deal.’
Canadian Dollar (CAD) Flat as Oil Prices Slump
The oil-sensitive Canadian Dollar was left under pressure on Tuesday as oil prices fell for a second day thanks to increased expectations of a rise in US crude inventories along with doubts OPEC will cut output in December.
According to Commerzbank analyst Carsten Fritsch there are ‘doubts about OPEC+’ which are weighing on prices this week.
Last week saw oil prices rise thanks to a drop in US inventories and signs US-China trade tensions were easing.
However, US President Donald Trump’s optimistic comments on Monday did little to buoy oil prices and commenting on this, OANDA analyst, Craig Erlam noted:
‘Trump and his team have repeatedly stressed the progress made in recent days and the prospect of it being wrapped up earlier than anticipated, although by now we should take this kind of rhetoric with a pinch of salt.
‘Brent found resistance around $62 but that may prove temporary if trade headlines continue to improve and central banks keep slashing interest rates.’
Pound Canadian Dollar Outlook: Will a Dovish BoC Weigh on CAD?
Looking ahead to Wednesday, the Canadian Dollar (CAD) is likely to slump against the Pound (GBP) following the Bank of Canada’s (BoC) interest rate decision and monetary policy report.
While the bank is expected to leave rates unchanged, an overly dovish report, focusing on risks to the economy, could see ‘Loonie’ sentiment slide.
Meanwhile, Brexit is likely to remain the main catalyst for movement of the pairing. If the Prime Minister is able to secure a December general election, it could cause the Pound Euro (GBP/EUR) exchange rate to slide as Commerzbank analyst Thu Lan Nguyen argues this could create the risk of constant postponement of Brexit.