Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Increases as Farage Announces Leave Alliance
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rallied as the UK avoided recession and Brexit optimism increased, leaving the pairing trading at around CA$1.7022.
At the start of the week, Sterling rallied to a one-week high as Brexit Party Leader Nigel Farage announced a Leave alliance.
Farage revealed he would not contest the 317 seats the Conservative Party won in 2017 which investors saw as significant to current Prime Minister Boris Johnson’s chances of winning a majority on 12th December.
Commenting on this, FX strategist at BNY Mellon, Neil Mellor said:
‘The Tories will be heaving a sigh of relief and it also reduces at the margin the prospect of a hung parliament.
‘The market has shown a tendency of being supportive of a clear result.
‘The Tories are also seen as more market-friendly than Labour.’
However, the Brexit Party leader did not pledge to withdraw from Conservative target seats.
Sterling (GBP) Edges Higher as UK Escapes Recession
The Pound rose against the Canadian Dollar as data from the Office for National Statistics (ONS) revealed the UK escaped falling into recession.
The UK’s rebound during the third quarter saw annual growth rise by 1% while quarter-on-quarter, growth increased by a smaller-than-forecast 0.3%.
Sterling was able to rally against the ‘Loonie’ despite the data revealing the UK saw its weakest annual growth seen since 2010 when the economy began recovering after the Global Financial Crisis.
The global economic slowdown and Brexit uncertainty dragged on the UK economy and further data revealed it contracted by -0.1% in September.
Commenting on this morning’s data, economist at the Institute of Directors, Tej Parikh said:
‘Narrowly avoiding a recession is nothing to celebrate. The UK economy has been in stop-start mode all year, with growth punctuated by the various Brexit deadlines.’
Canadian Dollar (CAD) Falls as Trade Tensions Weigh on Oil Prices
The Canadian Dollar was left under pressure at the start of the week as US-China trade optimism faded after last week’s rally.
On Monday oil prices fell as US President Donald Trump downplayed reports that Beijing and Washington agreed to an imminent lifting of tariffs.
The President said the reports of US willingness to remove tariffs as part of the ‘Phase One’ trade deal that previously buoyed markets, were incorrect.
Despite Trump’s later comments that trade talks between the US and China were moving along ‘very nicely’, he also added that Washington would only make a deal if it was the right one for America.
In a note, Commerzbank stated: ‘We expect the sideward trading to continue for the time being, with the trade conflict headlines likely to dictate the direction.’
Pound Canadian Dollar Outlook: Will Weak UK Wage Growth Weigh on GBP?
Looking ahead to Tuesday, the Pound (GBP) could slide against the Canadian Dollar (CAD) following the release of the UK’s employment and wage growth data.
If September’s unemployment rate rises higher than expected and wage growth shows signs of slowing, Sterling sentiment is likely to slump.
Meanwhile, it is likely that if further US-China trade tensions cause oil prices to slide on Tuesday the ‘Loonie’ will be left under pressure.
If oil prices decline for the second day in a row, it is likely CAD sentiment will slump causing the Pound Canadian Dollar (GBP/CAD) exchange rate will be left flat.