Pound to Canadian Dollar Exchange Rate Struggles to Hold Ground amid Election and Fed Jitters
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has struggled to hold its best levels this week. Despite generally sturdy Pound (GBP) demand, General Election uncertainty and central bank speculation is keeping the pair under pressure.
While GBP/CAD opened this week at the interbank level of 1.74 and briefly touched on its best levels in seven months, investors have been hesitant to keep buying the pair.
Amid political and central bank uncertainties, GBP/CAD has been pushed slightly lower into the region of 1.73 at the time of writing.
Ultimately the Pound’s sturdiness has meant that the Pound to Canadian Dollar exchange rate hasn’t moved too far from the week’s opening levels. However, the results of Britain’s 2019 General Election could shock investors tomorrow and cause a late-week shift in movement.
Pound (GBP) Exchange Rates Volatile as UK Public Heads to the Polls
In recent weeks, investors piled into the Pound (GBP) on rising bets that Britain’s ruling Conservative Party would be able to win a comfortable majority in the 2019 General Election. This would help it to push its relatively soft Brexit plans through UK Parliament.
However, fears of further Brexit uncertainty ahead, as well as rising speculation that Britain could still be headed for another hung Parliament, have limited the Pound’s appeal in recent sessions.
Some of the latest polls showed the polls narrowing. As a result, Sterling has been unable to hold its best levels.
While the currency is relatively steady today as Britain votes in the election, volatility is notably high and could mean sharp movement is on the way.
According to Gearoid Keegan, Senior Treasury Dealer at Investec:
‘The polling over the last two days has showed that a Conservative majority might not be as sure a thing,
Boris Johnson is still on track for a majority. If he gets a 40-50 seat majority, that would be sterling positive. Any other outcome, a narrow majority or even a hung parliament – which would be disastrous – would be Sterling negative,’
Canadian Dollar (CAD) Exchange Rates Benefits from Rival Weakness
Despite a lack of strong or supportive Canadian ecostats in recent weeks, the Canadian Dollar (CAD) has seen relatively strong performance this week overall.
The Canadian Dollar, benefitting from central bank speculation and weakness in its rival the US Dollar (USD), has been sturdy enough to push GBP/CAD back down from 7-month-highs.
The Bank of Canada (BoC) has notably maintained an optimistic stance on Canada’s economy despite poor Canadian data, and this is doing a lot to keep the Canadian Dollar appealing.
However, the US Dollar’s (USD) losses since yesterday boosted the Canadian Dollar even more.
The US Dollar plunged when the Federal Reserve indicated that it would not hike US interest rates in 2020. On top of USD losses, this also softened perceived policy divergence between the Fed and BoC, further boosting Canadian Dollar demand.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Volatility Expected in Election Reaction
With Britain’s public voting in the 2019 General Election today and the outcome likely to affect the future of the Brexit process, the Pound to Canadian Dollar (GBP/CAD) exchange rate could potentially see highly volatile movement towards the end of the week.
Sharp movement could drive the Pound (GBP) throughout Thursday night and Friday as the results come in and are digested.
A strong majority for the ruling Conservative Party could lead to a jump in Pound demand, but this may be limited as Brexit uncertainty would likely return in the coming months.
A tight race or hung Parliament, on the other hand, could cause the Pound to slump as political and Brexit uncertainty would intensify again.
While this news will dominate GBP/CAD movement towards the end of the week, the Canadian Dollar (CAD) may be influenced by an upcoming speech from Bank of Canada (BoC) Governor Stephen Poloz.
Poloz’ speech this evening could give investors a better idea of if the BoC will maintain an optimistic stance despite weakness in recent Canadian data, and could influence the Pound to Canadian Dollar (GBP/CAD) exchange rate.