GBP/CAD rates have levelled out following a positive move for Sterling earlier this week.
The pair is now trading just above 1.75, with Sterling making inroads again the majority of the major currencies during the early part of the trading week. This positive move came despite the Canadian economy remaining strong in the eyes of investors, with a run of positive economic data supporting this theory.
However, despite this positive perception the CAD has actually struggled against the Pound of late, making little impact against its Sterling counterpart since the turn of the year.
The Pound has gained over two cents this week but with the CAD finally gaining some support around 1.75, the key question is which direction the pair will take next?
With the current trend surprising considering the relative health of each economy, all eyes will be locked on this morning’s UK Gross Domestic product (GDP) figures.
This will be viewed with interest by investors and if a figures comes outside of the expected 0.4% growth, expect further movement on GBP/CAD rates this morning.
Anyone with an upcoming CAD currency requirement should also keep an eye on developments at the Davos economic summit, where US President Donald Trump is speaking later this evening. Considering his past outbursts on a variety of topics, any further backlash regarding the current North American Free Trade Agreement (NAFTA) talks could be detrimental to the CAD’s value.
In fact looking at the recent trend and it is likely that this topic is playing a key role in the CAD’s inability to gain any sustained support against the Pound.
Trump has been extremely vocal about his dissatisfaction with the current NAFTA terms, feeling they do not benefit the US as they should. He has already threatened to pull out of the agreement, which if it were to happen would be extremely detrimental to the Canadian economy.
Whilst Canada’s global export of crude oil helps support their economy, their primary importers are the US. Therefore any shift in this trade relationship will no doubt have an impact, which is currently being factored into the CAD’s value, at least to some extent by investors.
Whilst Trump may struggle to convince Congress to pass any decision to leave NAFTA, the current uncertainty is weighing heavily on investors and as such the CAD is struggling to make an impact against the major currencies, including the Pound.
However, the current trend could be reversed at any time and considering the relative health of the Canadian economy, I would be tempted to remove the on-going risk factor and secure any short-term GBP/CAD positions whilst rates continue to trade around the current levels.
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