Sterling has made significant gains against the CAD over the past 10 days, with the Pound gaining over 8 cents during this period.
This has provided those clients holding Sterling with some much needed respite following some bleak months for the UK economy and an excellent opportunity to sell their sterling positions at a much higher value, than many would have anticipated only a couple of weeks ago.
The Pound has struggled against the uncertainty surrounding the UK’s Brexit and how this will be facilitated following the triggering of Article 50 in March.
Yesterday’s Supreme Court ruling was being followed extremely closely by investors and the expected result occurred, as they backed up the High Court’s decision that the Brexit plans must be ratified through Parliament before we can officially leave the EU.
This outcome had been priced into the current GBP/CAD rates over recent days, as it means that a softer Brexit plan is likely due to the majority of MP’s having to agree on it. The likelihood is they will look to keep some sort of open relationship with Europe in terms of future trade deals and possible immigration rights and this has helped drive up investor confidence in the UK economy and ultimately the Pound.
The CAD was performing well for many months due to a lack of confidence in the UK economy and a rise in oil prices, Canada’s main export, and this allowed the CAD to reach near four year highs against Sterling. It was always likely that we would see some sort of snap back but we need to consider that the current levels (today’s high 1.6422) are still extremely attractive when you consider the history on the pair.
It does seem as though the Pound has found a foothold in the market and whilst sustainable Sterling strength is unlikely under current market conditions, the CAD may struggle to return to its recent highs.
Looking ahead and there is little economic data of note for Canada this week, so all eyes will be on tomorrow’s UK Gross Domestic Product (GDP) figures. With a slight drop expected from last month any figure outside of the 0.5% growth is likely to cause additional volatility on GBP/CAD exchange rates as we head towards the weekend.
Personally, I would not be gambling on what is still a fragile UK economy and with so many unanswered questions remaining regarding our future economic outlook following Brexit, I would be following the current spike very closely. I do feel the CAD will find support under 1.70 and as such it may be worth protecting the gains made over the past 10 days.
If you have an upcoming currency transfer to make and are concerned about the current market instability, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact us on 0044 1494 725 353 and ask one of the team for Matt.
Alternatively, I can be emailed directly on [email protected] and can answer any queries you have about the current market trends & forecasts.