The Pound attempted to continue its recent rally yesterday, but the Pound to Canadian Dollar (GBP/CAD) exchange rate is recoiling lower today. The Pound is being sold from its best levels on profit-taking, while the Canadian Dollar benefitted from the Pound’s losses and continued its own rally amid stronger oil prices and data.
Last Week: Pound Capitalises on Federal Reserve News
While the Canadian Dollar has been fairly appealing on rising oil prices lately, it has been unable to avoid losses against a surging Pound.
Last week saw the Federal Reserve indicate that its US monetary policy plans would focus more on employment than tackling inflation. It led to bets that US monetary policy would remain ultra-loose for a long time to come.
Amid concerns about the US economy and coronavirus situation, Britain’s situation is seen as relatively optimistic in comparison. This bolstered the Pound’s appeal as investors prefer Sterling to the US Dollar.
Three Things to Watch For This Week
- UK PMI Results
Markit’s final August UK services and composite PMIs are due for publication tomorrow. If the data comes in stronger than expected it could bolster the Pound’s appeal and help it to avoid losses.
- Canadian Job Market Report
Friday will round off the week with Canada’s August job market report. If Canada’s job market has been more resilient to the pandemic than expected, the Canadian Dollar is more likely to keep seeing strong performance.
- Brexit Developments
With Q3 heading into its final month, markets are increasingly anxious about the lack of progress in UK-EU Brexit negotiations. Rising hard Brexit bets could return to focus for Pound investors.
The Pound to Canadian Dollar exchange rate could keep falling back from highs if Brexit fears return, but strong UK data or weak Canadian data could help the pair to sustain more of its recent gains.