Pound Canadian Dollar (GBP/CAD) Exchange Rate Sinks as ‘Loonie’ Rises on Fading US-Iran Tensions

GBP/CAD Exchange Rate Falls as Canadian Dollar Traders Hopeful on US-China Trade Deal

The Pound Canadian Dollar (GBP/CAD) exchange rate eased today, with the pairing currently trading around CA$1.701 after the ‘Loonie’ benefited from news the conflict between the US and Iran had faded.

This follows calmer rhetoric between Washington and Tehran following the Iranian airstrike on US military bases in Iraq, which resulted in no causalities for the US and its allies.

President Donald Trump commented in yesterday’s speech:

‘Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world. No American or Iraqi lives were lost because of the precautions taken, the dispersal of forces, and an early warning system that worked very well’.

Canadian Dollar (CAD) investors are now turning their attention to the US-China ‘phase one’ trade deal, with China’s Vice Premier Liu He set to travel to Washington next week to sign a trade deal between the two superpowers.

We could see the risk-sensitive ‘Loonie’ begin to edge higher as the US edges closer to securing a deal with China, while any further de-escalation of the US-Iran conflict would also boost the CAD/GBP exchange rate.

CAD traders will be awaiting the speech by the Bank of Canada’s (BoC) Governor, Stephen Poloz, later today. Any dovishness about the Canadian economy going into the new year, however, would prove detrimental to the Canadian Dollar.

GBP/CAD Exchange Rate Eases as UK Retail Sales Fell to Record Lows in 2019

The Pound (GBP) struggled after today’s release of the UK BRC like-for-like retail sales figure for December, which fell below forecasts of 2% to 1.7% – making 2019 its worst year on record.

Helen Dickinson, Chief Executive of the BRC, commented:

‘2019 was the worst year on record and the first year to show an overall decline in retail sales. Twice the UK faced the prospect of a no-deal Brexit, as well as political instability that concluded in a December general election, further weakening demand for the festive period.’

However, after a meeting which was described as ‘positive’ between Prime Minister Boris Johnson and the President of the European Commission, Ursula von der Leyen, Sterling traders are becoming more hopeful that a 31st January Brexit could go ahead without any further complications.

Nevertheless, post-Brexit speculation over the British economy is already beginning to haunt UK markets, after Mrs Leyden commented that it would be impossible the UK and EU to secure a full trade deal in Boris Johnson’s tight timeframe of December 2020 for the transition period.

GBP/CAD Outlook: Could ‘Loonie’ Improve on Rising Oil Prices?

Canadian Dollar (CAD) investors will be looking ahead to tomorrow’s release of December’s Canadian unemployment rate figure, which is expected to dip slightly from 5.9% to 5.8%.

US-China trade relations, as well as developments around the US and Iran, will continue to drive the CAD/GBP exchange rate. Any further escalations between Washington and Tehran, however, could boost oil prices and provide some uplift for the ‘Loonie’.

Brexit developments will remain firmly in focus for Pound investors this week, with the EU Brexit Withdrawal Bill expected to pass through the House of Commons relatively unchallenged now that Boris Johnson has a comfortable Conservative majority.

If it begins to look like a clear path ahead to a 31st January Brexit, we could see Sterling react positively as British businesses can once again begin to make plans for the future.

David Moore

Contact David Moore