With the Pound to Canadian Dollar exchange rate currently trading within very thin ranges, I personally think this could be the calm before the storm as investors and financial markets await the outcome of next Tuesday’s key vote with the House of Parliament.
Despite all indicators pointing to a loss for UK Prime Minister, Theresa May regarding her Brexit plan that has already been agreed in principle by the 27 EU leaders, May must now convince MPs between now and the 11th that her deal is best for the country moving forward. Towards the end of this week there has been calls for May to postpone the vote as some political experts have predicted that she could lose by as much as 200 votes.
If the vote goes ahead and May loses dramatically, I think this could put her position under pressure and the likely effects this would have on the Pound’s value would be negative, and I would expect to see the GBP/CAD exchange rate dip below 1.70 which has previously been a key support level for the Pound to Canadian Dollar rate.
The Loonie has also been coming under pressure this week, otherwise I think we could have already seen 1.70 broken. On Wednesday the Bank of Canada (BoC) opted to keep interest rates on hold as expected, but CAD softened after the monetary policy meeting after the BoC adopted a dovish tone compared to its October statement. This implies that the economy is cooling off and it caught the markets off guard, sending CAD exchange rates lower.
CAD has also come under pressure after the CFO of a major telecoms company, Huawei has been arrested in Canada regarding a breach of the sanctions placed on Iran by the US. This has concerned financial markets and there has been a sell-off of commodity currencies and also global equities. This matter is likely to continue to weigh on CAD so there are many factors influencing the GBP/CAD exchange rate at the moment.
Apart from next Tuesday’s key vote in the UK, there will also be UK GDP data released on Monday morning so if you wish to be updated should there be a major market movement, do feel free to register your interest.
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