GBP/CAD rates have remained at consistent buoyancy levels over the last month. As has been the case for nearly a year. The pound has failed to breach 1.77 and is proving to be a stubborn resistance point.
It was late March 2018 when the pound’s value dropped below this level and sterling is yet to recover. GBP/CAD currently sitting in the low 1.75s.
It has been a turbulent year for both Canada’s and the United Kingdom’s economies. Brexit remains the key factor on GBP/CAD and will continue to be so for the foreseeable.
Global economic uncertainty which Trump has been a a major contributor to has caused investors to shy away from riskier commodity based currencies such as the Canadian Dollar in search of safe haven currencies.
This has in turn caused Canadian Dollar value to stagnate against Sterling in recent months and is holding back the Canadian Dollar from making significant gains.
Oil pricing affecting Canadian Dollar value
A potential upturn for CAD has been held back by oil pricing. Canada’s primary export is oil and any variation in oil price has an impact on the Canadian Dollar. A fall in demand and a drop in oil price has left a vacuum in the economy which is not being filled from other areas of industry.
We have seen a mixed bag of data from Canada this week with an increase in Retail Sales from -0.1% to 0.4% and Consumer Price Index (CPI) data, a key measure of inflation showing a decline from 1.5% to 1.2%
In the coming weeks expect high levels on volatility on GBP/CAD as Brexit negotiations continue. At present I think an extension is the likely outcome which may slightly ease investor nerves. There is still potential for a deal short term however and if this does occur expect substantial gains for sterling.
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