Pound to Euro exchange rate outlook: New UK Prime Minister and Cabinet, how will the markets react?
The pound to Canadian dollar exchange rate has bounced higher after much stronger than expected retail sales data yesterday providing a boost for the GBP vs CAD pair. Despite the small improvement, the pound continues to test the lower levels with the ongoing uncertain political situation in the UK. The new Prime Minister will be announced on Tuesday and is highly likely to be Boris Johnson. A new cabinet will need to be formed and this will likely be skewed towards leaving the European Union. The previous cabinet was largely split down the middle between those MP’s who supported Remain and those that supported Leave. There is likely to be considerable market volatility for the GBP vs CAD pair on the back of any statements made by the new incoming Prime Minister.
Brexit No Deal possibility: Will a deal be made by the October 31st deadline?
The pound exchange rate is pivoting on whether or not there will be a no deal. Any suggestion that Britain will leave on 31st October without a deal will likely see the pound fall further just as any change to the contentious Irish backstop which could help seal a deal could see the pound rally higher against the Canadian dollar. A vote in parliament yesterday has made the prospect of proroguing parliament that much more difficult after the Benn amendment effectively blocks any suspension of parliament between 9th October and 18th December.
Bank of Canada: Central banks cutting interest rates, will BoC also cut rates?
The Bank of Canada may come under pressure to follow other central banks across the globe to cut interest rates. Both fellow commodity currencies the New Zealand dollar and Australian doolally have seen interest rate cuts by their respective central banks. The ECB is also prepared to cut rates lower or pursue further asset purchases whilst the US are almost certainly going to cut interest rates at the meeting later this month. The Canadian dollar is likely to react to any moves by the US Federal Reserve and there could be high volatility on any decisions made.
There had been reports that Boris Johnson may try to prorogue parliament to try and force a no deal Brexit. The political twists and turns are making the British political situation look very uncertain and a general election is starting to look more and more likely, something that would carry its own risk for GBP to CAD. Those looking to sell Canadian dollars could see some even better opportunities in the coming weeks and months as the markets try to second guess how Brexit will end. If you would like to know more about the factors influencing GBP/CAD exchange rates, or have an upcoming currency transfer, feel free to contact me directly using the form below.