Pound Canadian Dollar Exchange Rate Slumps amid Mounting Economic Woes
The Pound Canadian Dollar (GBP/CAD) exchange rate remains under pressure as public sector debt is at its highest level since the early 1960s.
At time of writing the GBP/CAD exchange rate is trading around $1.5365, a 0.63% drop from this morning’s opening levels.
Pound (GBP) Slides on Economic and Political Uncertainty
The Pound briefly enjoyed a rally in the wake of Liz Truss resigning as prime minister yesterday. But today, Sterling returns to volatility amid a myriad of political and economic headwinds.
Government borrowing expectedly rose due to higher interest. However, the September figure of £79.3bn far exceeded market expectations of £73.6bn. This brings public sector debt as a share of GDP at 98%, the highest level since the 1960s. Ahead of the October 31 fiscal plan, the government will need to announce around £40bn in tax rises or spending cuts.
Meanwhile, further weighing on Sterling is the publishing of retail sales for September. For the second consecutive month, retail sales declined. A 1.4% fall in sales follows a 1.7% drop from August, highlighting the cost-of-living crisis impacting household spending. The bigger-than-expected drop saw volume of sales fall 1.3% below pre-Covid levels in February 2020.
Elsewhere, perhaps the biggest concern for GBP investors is the return to political uncertainty. As Liz Truss became the shortest-serving prime minister in history, and the fourth Tory leader in four years. Boris Johnson appears to be in the running, with business secretary Jacob Rees-Mogg publicly backing Johnson. A new party leader will be selected next week, and former leadership candidates Rishi Sunak and Penny Mordaunt are set to join the race once again. Ongoing political volatility could deter GBP investors.
Canadian Dollar (CAD) Under Pressure amid Risk-Averse Market
Meanwhile, the Canadian Dollar is failing to capitalise on the Pound’s woes as global recession fears weigh on market sentiment.
Even moderately positive news out of China failed to lift the Canadian Dollar as Beijing announced a potential pullback of its strict zero-Covid policy. A scaling back of quarantine procedures indicates a step closer to easing the strict policies that have seen China’s economy slow on numerous occasions.
However, delayed GDP data release from China only serve to exacerbate recession fears. In turn, WTI crude has dropped below $84 a barrel mark once again as investors get jittery over global slowdowns.
Pound Canadian Dollar Forecast: UK Political Chaos to Weigh Further on the Pound?
Looking ahead, the Pound Canadian Dollar exchange rate could see further fluctuations amid political turbulence. Fiscal uncertainty is unlikely to inspire investors and if a General Election was to happen, it would throw everything in the air once again.
Meanwhile, retail sales for Canada will be published later today. Expected growths across the board could push the ‘Loonie’ higher.