Pound Canadian Dollar (GBP/CAD) Exchange Rate Muted After Surprise UK Retail Sales Fall

Disappointing UK Retail Sales Limit Pound Canadian Dollar (GBP/CAD) Exchange Rate Upside

An underwhelming month of UK retail sales saw the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate struggle to hold onto its positive momentum this morning.

As sales excluding auto fuel unexpectedly contracted -0.3% on the month this undermined market confidence in the resilience of the UK economy.

Weaker levels of consumer spending could put a significant dampener on the fourth quarter gross domestic product, especially in the wake of underwhelming manufacturing sector data.

With political uncertainty appearing to limit the confidence of UK shoppers the mood towards Pound Sterling (GBP) soured, even though sales still saw solid growth on the year.

Ongoing US-China Trade Tensions Weigh Down Canadian Dollar

Increasing doubts over the likelihood of a sustained thaw in US-China trade tensions left the Canadian Dollar (CAD) under pressure, meanwhile.

After the Trump administration raised the suggestion of fresh tariffs on Chinese exports the general sense of market risk appetite weakened, dragging down the risk-sensitive Canadian Dollar.

Although the oil market largely shrugged off these concerns, buoyed by an unexpected drawdown in US crude oil inventories, this was not enough to shore up CAD exchange rates today.

As forecasts pointed towards another underwhelming month for the new housing price index this gave investors additional incentive to sell out of the Canadian Dollar in the near term.

CAD Exchange Rates Vulnerable to Signs of BOC Governor Dovishness

Comments from Bank of Canada (BOC) Governor Stephen Poloz could offer the GBP/CAD exchange rate a fresh boost ahead of the weekend.

With markets wary of the potential for the BOC to adopt a more dovish outlook in the coming months the Canadian Dollar looks vulnerable to any cautious commentary.

If Poloz expresses any reservations over the economic outlook this is likely to fuel speculation that an interest rate cut could be on the cards.

As long as markets see a risk that the BOC could loosen monetary policy in the next few months CAD exchange rates may come under increased pressure.

However, signs of optimism from Poloz may offer the Canadian Dollar some measure of support on Friday, even if market risk appetite remains muted.

Signs of UK Industrial Resilience May Offer Pound Boost

The lingering sense of UK political anxiety is likely to limit the potential for GBP/CAD exchange rate gains as markets continue to gear up for the early December general election.

Even so, November’s CBI industrial trends orders index could encourage the Pound to recover further ground on Tuesday.

With forecasts pointing towards a modest improvement from -37 to -28 on the month this may offer GBP exchange rates a boost, fuelling hopes of a more resilient fourth quarter economic performance.

If the index fails to show a solid uptick, however, the GBP/CAD exchange rate could falter as worries over the outlook of the UK economy persist.

Louisa Heath

Contact Louisa Heath