The pound to Canadian dollar exchange rate has continued to fall due to Brexit talks coming to a standstill, despite last week’s disappointing Canadian GDP release.
Canadian economic developments: Effects on GBP/CAD exchange rate
Posting 0pc growth for July, the markets were disappointed with the figures having expected a 0.1pc expansion. Canada’s economy had outperformed during Q2 as oil prices crept up and exports increased enabling the economy to grow at a healthy 3.7pc annualised figure, its strongest in years. However, sterling failed to take advantage of this news, itself impacted by the ongoing Brexit stalemate, and therefore we continue to see exchange rates between the pair in the 1.60’s at 1.6280 at the time of writing.
Looking ahead this week Canadian unemployment figures will be monitored closely and are expected to hold steady at 5.7% continuing the strong employment theme in this commodity-based economy. Any sign that this figure is beginning to creep up will impact exchange rates as expectation of a loosening of monetary policy from the Bank of Canada creep up.
Global trade tensions could affect Bank of Canada monetary policies
Escalating global trade tensions and the related uncertainty are a concern for the Bank of Canada, and any further signs of a stalling domestic economy could see a call to action at their October 30th meeting. To date, the continued hold of 1.75pc headline rate has been in opposition to the global trend of interest rate cuts.
Brexit talks to take place today
For sterling, another important few days lie in wait for Brexit, with Boris Johnson rumoured to be meeting the Irish President Leo Varadkar at a secret location today to thrash out the Irish backstop proposal in his Withdrawal deal.
The pound has performed poorly against the Canadian dollar since the UK referendum in June 2016 with a low of 1.5735 and a very brief spell above 1.80 in early 2018. The recent heightened political uncertainty for the UK and the resilience of the Canadian economy on the global arena has seen the pound struggle to make much headway from these lower levels and a move below 1.60 could spell further trouble for dollar buyers.
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