Pound to Canadian Dollar Struggles to Advance as UK Summer Statement Fails to Impress
Update 16:37 BST 08/07/2020:
Investors remained hesitant to buy the Pound to Canadian Dollar (GBP/CAD) exchange rate through Wednesday’s session.
After slipping from fortnight highs this morning, GBP/CAD has been trending a little lower. GBP/CAD currently trends in the interbank region of 1.70.
Though the pair sustains most of this week’s gains, it is struggling to advance further.
Today’s biggest event was the UK Summer Statement. However, it was not enough to bolster demand for the Pound (GBP).
Economic thinktank NIESR was unimpressed with UK Chancellor Sunak’s presentation, saying:
‘The incentives offered to employers look too small to be effective. Many employers have been topping up the pay of furloughed workers and are expected to bear more of the cost of the scheme from next month. They will be reluctant to do this now they know that the scheme won’t be extended.’
(Originally published 14:13 BST 08/07/2020)
Pound to Canadian Dollar Exchange Rate Down amid UK Summer Statement
Speculation that there could be Brexit developments over the coming month have led to gains in the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate. The Canadian Dollar’s (CAD) weakness on global and US economic jitters is also helping the pair rise.
The Canadian Dollar’s weakness has been mixed but has been among the main reason for GBP/CAD gains lately. Last week saw GBP/CAD edge higher to the interbank level of 1.69, and this week the pair continues to trend with an upside bias.
Yesterday, GBP/CAD jumped up over a cent as global coronavirus jitters worsened. GBP/CAD trended near a half-month high of 1.70 last night, before slipping slightly from those highs today.
Sterling investors are awaiting domestic coronavirus developments, but they may not have much impact on the outlook either.
Pound (GBP) Exchange Rates Slip amid UK Summer Statement
Investors have been buying the Pound (GBP) since last week. The British currency rebounded from its worst levels in profit-taking, and continued to edge higher due to Brexit hopes.
Speculation has risen that UK-EU Brexit negotiations could see progress this month. However, Sterling’s gains on Brexit hopes are also limited as other analysts warn that progress is far from certain.
This is leaving the Pound jittery today, as investors await news from UK Chancellor Rishi Sunak’s Summer Statement.
According to Jordan Rochester, Forex Strategist at Nomura, Sterling may not be impacted much unless there is surprising news that could impact growth:
‘It’s an event worth watching out for but not clear if it’s a fundamental game change for the direction of the currency,’
Canadian Dollar (CAD) Exchange Rates Hit as Global Coronavirus Fears Rise
The Canadian Dollar (CAD) is a currency correlated to market demand for risk and trade sentiment.
As a result, rising fears of a ‘second wave’ of coronavirus infections have been weighing heavily on the Canadian Dollar lately. ‘Second wave’ fears have hit risk-sentiment, and a large portion of the second wave appears to be occurring in the US where cases are surging.
As Canada’s economy is closely related to the US economy, this is causing Canadian economic concerns as well.
This is on top of existing concerns about Canada’s economy, as well as concerns over Canadian trade and weak oil prices. According to the National Bank of Canada:
‘It is unfortunate that the Fitch downgrade occurred at a time when of a potential of dampening demand for oil because of tightening lockdown restrictions in some large US states because of Covid-19 cases.
We cannot ignore the fact that despite the new Canada-US-Mexico trade agreement, the US is contemplating imposing tariffs on Canadian aluminum.’
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Could be Knocked by Canadian Data
The Pound to Canadian Dollar (GBP/CAD) exchange rate could climb today if UK fiscal policy news impresses investors.
While the market focus remains on Britain’s Summer Statement today, the Canadian Dollar (CAD) could see stronger demand in the coming sessions.
The Canadian Dollar has been kept under pressure amid concerns about a ‘second wave’ of coronavirus cases, as well as a weak global trade outlook. However, it could see stronger demand at the end of the week if Canadian data impresses investors.
Canada’s June job market report will be published. It will give investors one of the clearest ideas yet of how Canada’s economy has been performing amid the coronavirus pandemic.
If Canadian job stats impress at the end of the week and other factors like trade or oil impress, the Pound to Canadian Dollar (GBP/CAD) exchange rate could see further losses from its recent highs.