With pound to Canadian dollar exchange rates touching their lowest interbank levels in nearly 2 years, it seems a good time to be asking questions about whether fresh lows could be struck for pound to Canadian dollar exchange rates.
The week ahead sees a number of data releases which may influence the behaviour of the GBP/CAD pairing. To see where we are going, it can be helpful to look at where we have been. The increased prospects of a no-deal Brexit, in the currency market’s eyes, has seen the pound much weaker.
Canadian Dollar supported by BoC interest rates
The Canadian dollar is also stronger owing to it now being second only to the United States, in terms of the highest interest rates globally amongst the world’s leading economies. Whilst the US recently cut their base rate, and expectations are the UK and Europe may follow suit, the Canadian dollar is benefiting from commentary that indicates their central bank, the Bank of Canada will hold firm.
The raising and lowering of interest rates will influence a currency by making it more or less attractive to hold. This is not always totally guaranteed but is a general rule on exchange rates and interest rates. The fact the BoC are holding firm has increased investors interest in the Canadian dollar, and further helped its dominance against the pound.
Economic data that may influence GBP/CAD exchange rates this week
The week ahead contains various sets of economic data to drive the market. Markit Services PMI (Purchasing Managers Index) released for the UK Monday morning will be of interest. Services accounts for an estimated 80% of the economy and with the number at a predicted 50.2, it is dangerously close to the 50 mark on the survey, with anything above 50 representing expansion and below contraction.
The next big pieces of news directly concerning the pound and Canadian dollar are then Friday with UK GDP (Gross Domestic Product) at 09.30 am UK time, and then Canadian Unemployment at 13.30 UK time. UK GDP surprised last time but any revisions lower might see the pound lose value, as the performance of the pound can historically be linked to the quality of the economic data.
If the Canadian economy is still shown to be creating jobs, it could see the Loonie dollar remain strong, based again on the recent performance. Of course, no one can say exactly what will happen in the future on exchange rates, but we do aim to ensure our clients and readers are fully up to date with the latest news.
It is well worth highlighting how arguably two of the biggest topics outside of economic data on this pairing, Brexit and the Trade Wars, can change in sentiment at any moment. GBP/CAD is currently trading at 1.6050 on the interbank rate, after fresh concerns over the trade wars from news stories reporting Trump is ready to consider additional tariffs, saw the Loonie slightly weaker.
Thank you for reading my post and our content, I would be interested to hear from you if you have a currency transaction and wish to discuss the market and outlook.