GBP/CAD Update: ‘Loonie’ Struggles as US Economy Registers Weak GDP in July
The GBP/CAD exchange rate rose by 1.3% this afternoon, with the pairing currently trading around CA$1.755. As a result of a record low drop in US growth, investors have fled the risk-sensitive ‘Loonie’ as concerns continue to grow over the world’s largest economy.
The Canadian Dollar (CAD) also failed to benefit from today’s release of the Canadian Average Weekly Earnings figure for May, which rose by 10.4% year-on-year.
Nevertheless, with Canada’s economy looking more fragile now that the global economy shows worrying signs of slowing down, investors are steering clear of the Canadian Dollar more than before.
GBP/CAD Exchange Rate Edges Higher as Fears Grow Over US-China Trade Tensions
The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.5% today, with the pairing currently fluctuating around CA$1.740.
The Canadian Dollar (CAD) has continued to struggle today on an alarming deterioration in relations between the US and China.
US President Donald Trump appears to be getting tough on a US-China trade deal, closing China’s consulate in Houston on accusations of spying and blaming Beijing for difficulties with handling the coronavirus pandemic.
As a result, this has weighed on hopes for the Canadian economy, which relies heavily on global trade exports. Any further signs that the global economic situation could be jeopardised by souring relations between the world’s two largest economies would prove CAD-negative.
In Canadian economic news, today will see the release of the Average Weekly Earnings figures for May. Any improvement in the year-on-year figure could boost the CAD/GBP exchange rate.
Pound (GBP) Rises as Hopes Grow for Progress in UK-EU Post-Brexit Negotiations
The Pound (GBP) rose against the Canadian Dollar (CAD) owing to a lack of notable UK economic data releases this week. Instead, Sterling has benefited from a relative calm on the economic front, despite growing concerns of post-Brexit relations with the European Union.
European Commissioner for Trade, Phil Hogan, criticised the UK’s approach to trade talks with the EU, saying that Britain had only engaged with critical issues ‘in [the] last week or two’.
Mr Hogan added:
‘I actually say it’s only in the last week or two that we have noticed that people are starting to engage on the UK side. We welcome that very much. I think there is now a realisation by people in the negotiating side of UK that time is running out. The British business has started to be more vocal, privately and publicly, in relation to the importance of reaching a deal.’
However, now that trade talks also appear to be progressing – despite the late stage – GBP investors have become more confident that the renewed urgency could spur a compromise between the UK and the EU.
A spokesperson for Downing Street said:
‘The UK has engaged constructively on all issues throughout the negotiations… Both sides will need to work energetically if we are going to get an agreement in September.’
GBP/CAD Outlook: Could Strong Canadian GDP Data Boost the ‘Loonie’ on Friday?
Canadian Dollar (CAD) investors will be looking ahead to Friday’s release of May’s Canadian GDP figure. If this confirms consensus and rises from -11.6% to 3.5%, then we could see the ‘Loonie’ claw back some of its losses.
However, the Canadian Dollar (CAD) will continue to be driven by global risk sentiment this week. As a result, US-China trade tensions could continue to drag down market confidence in CAD.
The GBP/CAD exchange rate will remain sensitive to developments around UK-EU post-Brexit trade talks. Consequently, we could see Sterling edge higher if hopes grow on a possible consensus ahead of the September deadline.