Pound Canadian Dollar (GBP/CAD) Exchange Rate Eases After Post-UK Election Highs

GBP/CAD Exchange Rate Dips as Markets Absorb Conservative’s Landslide Victory

The Pound Canadian Dollar (GBP/CAD) exchange rate eased today, with the pairing currently trading around CA$1.764 after it soared to around CA$1.778 shortly after the Conservative Party secured a decisive victory in last night’s general election.

Markets expect Sterling to continue its upward march, as investors continue to welcome the news of an end to the parliamentary gridlock over Brexit, a shadow that has hung over UK businesses and weighed on the British economy.

Guy Foster, Head of Research at Brewin Dolphin, recommended caution, however, saying:

‘[A] lot can change over the coming months as the finer detail of the UK’s future trade relationship with the EU is negotiated. This is still, after all, just the beginning of the exit process. Even with the passing of the withdrawal agreement, the UK could still leave the EU without a deal at the end of 2020 if trade negotiations don’t proceed successfully.’

The GBP/CAD exchange rate will likely hold steady over the next few days as markets now focus on the Conservative cabinet to announce its next steps.

CAD/GBP Exchange Rate Edges Higher on US-China Trade Deal Hopes

The Canadian Dollar (CAD) has benefited from reports that the US and China may have agreed on a ‘phase one’ trade deal, with key sources indicating that China could purchase up to US$50 billion of US agricultural products as early as next year.

Robert Subbaraman, Head of Research at Nomura, commented:

‘We suspect China has agreed to much more than just increased US agricultural purchases.’

The risk-sensitive ‘Loonie’ benefited from renewed hopes of an imminent trade deal between the two superpowers today, with improving US-China relations providing a boost to the global trade-reliant Canadian economy.

Meanwhile, last night saw the Bank of Canada’s (BoC) Governor, Stephen Poloz, said that the global economy appears to face continued slow growth and as a result global low global interest rates were likely to persist.

Mr Poloz said:

‘Tariffs on imports are forcing companies to dismantle supply chains and create new ones that are likely to be less efficient.’

As a result, some Canadian Dollar investors are remaining cautious today, with Beijing yet to respond to the US’ claims of an imminent trade deal being inked ahead of the New Year.

GBP/CAD Outlook: All Eyes on the Conservative Party’s Next Moves

Sterling investors will be looking ahead to Monday’s publication of December’s flash Markit Services PMI, which is forecast to improve slightly from 49.3 to 49.6. If the figure beats forecasts, however, and emerges out of contraction territory we could see Sterling rise on renewed hopes for the British economy.

All eyes will be on the Conservative Party’s actions next week, and with Brexit still remaining a concern for markets, we could see the Pound benefit if the Tories initiate their plan to deliver Brexit by 31st January.

‘Loonie’ traders will be looking further ahead to Wednesday’s BoC inflation figures, with any signs of improvement providing some uplift for the CAD/GBP exchange rate.

US-China trade developments will also remain in focus, with any indication of a ‘phase one’ trade deal being secure being CAD-positive.

David Moore

Contact David Moore