UK politics dictating GBP/CAD
The snap election was deemed to be a smart move by Theresa May, unfortunately her cunning ruse did not go to plan. With the opposition so weak it seemed as though the election would be a foregone conclusion. However, with May attacking her core voters by stating those of a specific age would have to pay for their own care we saw many switch their allegiance. This was also combined with a very successful Labor campaign, particularly through social media.
With the need now for a coalition government we have seen Sterling fall heavily in value against the Canadian Dollar. A conservative, DUP coalition is likely to be finalised next week which should cause a small Sterling rally due to the escape from political limbo.
There are however further problems ahead. Brexit negotiations could prove problematic with Brussels demanding an excessive exit payment before commencing talks. This does not bode well for the pound.
There was UK inflation data released yesterday and again there was a rise. This can be considered as positive for the UK economy, but I beleive this is a worrying sign. The inflation issue is a direct result of the vote to leave the EU. the weak value of the pound is causing imports to go up in value. The price increase is then filtered on to the consumer. This is all well and good provided average wage growth is climbing at the same rate as inflation, unfortunately it is not. This does have potential to create recession.
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