A fairly resilient Canadian Dollar, as well as market demand for riskier trade-correlated currencies, briefly saw the British Pound to Canadian Dollar (GBP/CAD) exchange rate shed all of Monday’s gains yesterday, but continued Brexit speculation has kept the Pound buoyed above the week’s opening levels as investors anticipated upcoming major Brexit developments.
Since opening this week at the level of 1.7455, GBP/CAD has trended largely with an upside bias due to Brexit speculation. GBP/CAD briefly touched a new half-year high of 1.7747 on Monday night before being knocked back to the week’s opening levels again, but the pair continued to climb today and trended closely to the level of 1.7574 at the time of writing.
This was despite the UK government’s Brexit deal seeing yet another Parliamentary defeat yesterday.
While uncertainties over how exactly Brexit will unfold are keeping pressure on the Pound outlook, markets are betting that Parliament will vote in favour of delaying the formal Brexit date and this has offered Sterling some relief.
GBP Exchange Rates Firming as Investors Await No-Deal Brexit Vote
Demand for the Pound has been highly volatile this week as investors react to the latest major Brexit developments and speculations.
The Pound’s brief surge in strength on hopes for the government’s Brexit plan to succeed were short-lived, and UK Parliament once again voted decisively against the Brexit plan during last night’s meaningful Parliament vote on the deal.
However, while the government’s Brexit plan has again lost its possible path to law for now, market expectations that Parliament is most likely headed towards supporting a delay of the formal Brexit date kept the Pound buoyed today.
Investors bought the British currency amid bets that Parliament would reject a no-deal Brexit today and vote in favour of a Brexit delay tomorrow.
Still, analysts acknowledge that there is major uncertainty ahead even if Parliament votes in favour of delaying Brexit. This is because the UK government lacks a clear plan, and many EU officials have indicated they may not agree to delay the Brexit process without a good reason.
According to Ayako Sera, Senior Market Economist at Sumiotomo Mitsui Trust:
‘Without an acceptable plan, Britain might have a difficult time convincing European leaders at the EU summit next week, forcing market participants to reverse their positions on the Pound and again exposing the currency to sudden downturns.’
CAD Exchange Rates Lacks Notable Support versus Volatile Pound
The biggest cause of GBP/CAD movement was the Pound’s strength on Brexit speculation, but the Canadian Dollar was able to avoid even deeper losses due to some external factors making the risky commodity-correlated currency more appealing.
For example; prices of oil, Canada’s most lucrative commodity, have been stronger in recent weeks on speculation of further production cuts, which has been supporting Canadian Dollar demand.
On top of this, the Canadian Dollar has benefitted from weakness in its major rivals like the US Dollar.
The Canadian Dollar was a little more appealing following yesterday’s disappointing US inflation rate report, which fell short of market expectations in all major prints.
The data doused lingering speculation that the Federal Reserve could hike US interest rates again this year, boosting risk-sentiment and making the Canadian Dollar a bit more appealing.
Overall though, the Canadian Dollar’s resilience versus a highly volatile Pound was limited as Brexit speculation was the primary cause of GBP/CAD movement.
GBP/CAD Exchange Rate Forecast: Brexit Developments and Canadian Data Ahead
With major Parliament votes on the next steps for Brexit due in the coming sessions, Brexit is likely to continue to be the primary cause of Pound to Canadian Dollar exchange rate movement for the rest of the week.
Today’s big focus is the Parliament vote on whether or not MPs back a no-deal Brexit, which markets bet will end with a swift rejection of no-deal Brexit.
Following this outcome, Parliament will hold a vote on whether or not to formally delay the process tomorrow.
By the end of the week, it will be clear whether or not the government will either aim for a no-deal Brexit or attempt to formally delay the Brexit process.
However, the Canadian Dollar is likely to see a little more inspired movement towards the end of the week as well as this week’s notable Canadian ecostats will finally be published.
Canada’s January new housing prices data will come in on Thursday, followed by manufacturing sales stats on Friday which could cause some late-week Pound to Canadian Dollar exchange rate movement if they surprise.
International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.
TAGS: Pound Canadian Dollar Forecasts