Even after the Bank of Canada (BoC) took a relatively optimistic tone on Canada’s economic outlook this week, the British Pound to Canadian Dollar (GBP/CAD) exchange rate has seen another surge in demand today. The Pound is benefitting from weakness in the Canadian Dollar, as investors react to a shockingly poor Canadian job market report and anticipated next week’s major UK General Election.
Despite some optimism from the BoC and signs of hope in US-China trade relations, GBP/CAD has trended with an upside bias ever since opening this week at the level of 1.7168.
GBP/CAD briefly slipped back from highs following the BoC decision, but Friday’s concerning Canadian job market stats sent the ‘Loonie’ tumbling before markets closed for the week and GBP/CAD was trending near a 6 month best level of 1.7403 at the time of writing on Friday.
Looking ahead, UK election news will dominate the Pound’s movement next week, while Canadian Dollar investors await comments from Bank of Canada officials.
GBP Exchange Rates Round off Week of Strong Gains with Friday Dip
It’s been another highly volatile week for the Pound’s movement, as investors started out the week concerned that UK polls were showing signs of a narrowing election race, before betting heavily on a comfortable Conservative Party majority by the end of the week.
A brief trend in polls showing that the race could be narrowing didn’t persist all week. Instead, polls appeared to steady, still showing a solid Conservative lead, and investors began to pile in on bets that the Conservatives would win the election.
With under a week until the 12th of December General Election, bets of a Conservative majority led to significant Pound gains.
Investors are hopeful that the Conservative Party will be able to prevent a no-deal Brexit and push through relatively soft Brexit plans if they secure a government majority in the election.
Still, uncertainties persisted. The Pound’s potential for gains on these bets was limited, amid the lasting possibility that the election could still narrow and lead to a hung Parliament.
As a result, investors sold the Pound slightly from its best levels on Friday, adjusting positions on the British currency ahead of a major week in UK politics.
Despite this, the Pound still trended near its best levels against a broadly weak Canadian Dollar, as the ‘Loonie’ plunged today.
CAD Exchange Rates Slump as Canadian Job Market Posts Worst Monthly Report in Decade
The Canadian Dollar saw broadly mixed movement throughout the past week.
Initially, the Canadian currency weakened on speculation that the Canadian economy was weakening, combined with concerns that US-China trade relations were worsening again.
However, in the middle of the week, lingering signs that US-China trade relations were still steady, as well as a less dovish than expected tone from the Bank of Canada (BoC), briefly led to a rise in CAD demand.
The BoC was optimistic that the global and domestic economic outlooks were improving.
As a result though, Friday’s key Canadian job market report was even more concerning, falling well short of expectations in most major prints.
Canada’s key employment change figure slumped to -71.2k, and the key unemployment rate unexpectedly rose hugely from 5.5% to 5.9%.
It marked the worst month for job losses in over a decade and the Canadian Dollar tumbled in reaction.
Analysts were mixed on the data, but generally said that it would only have a big impact on Canada’s economic outlook if it became a trend. According to Julia Pollak, Labour Economist at ZipRecruiter:
‘Canada’s jobs report is disappointing, showing job losses for the second month in a row,
But observers should remember that the numbers are highly volatile and that this is still the strongest year for job growth in Canada in 17 years.’
GBP/CAD Exchange Rate Forecast: UK Election to Dominate Focus in Major Week
The week of Britain’s 2019 General Election is almost here, and while some typically noteworthy UK ecostats will be published on Tuesday they are likely to be overlooked as investors focus on election speculation.
Tuesday will see the publication of Britain’s trade, production and growth results from October, but the anticipated election will be held on Thursday the 12th of December.
Election polls will drive a likely volatile Pound’s movement throughout the week. Any signs that polls are narrowing further could lead to sudden Sterling losses.
Of course, the election results themselves, likely due around the end of the week, will be especially influential. A shock result, like a hung Parliament, could lead to a Pound plummet.
Amid the most recent poor Canadian job stats, Canadian Dollar investors will be looking for reassurance from Bank of Canada (BoC) officials. As a result, BoC Governor Stephen Poloz’ speech on Thursday could cause some notable CAD movement.
Of course, any surprise developments in US-China trade relations could also influence the Pound to Canadian Dollar exchange rate next week.
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