The UK’s general election has stolen all of the headlines this week and rightly so, the outcome of the election is crucial in deciding the future path for the GBP and the currencies that trade with it like the CAD. The potential chance for a hung parliament has weighed on the GBP and had investors twitching before the Tory majority was revealed.
For the CAD, it continued to benefit as the US Fed reserve stated that interest rate raises were not a concern for them throughout 2020. With news breaking early this morning that the Tories have retained their place in power, GBP has shot up back into front-running position.
Worried Investors Sunk GBP as Pre-Election Doubts Crept In
For the GBP, the general election is the biggest day in the political calendar. With Brexit primed to jet-off and out of the EU, the only thing that may have stood a chance of getting in its way was the potential for Jeremy Corbyn and his Labour party to rise and close the gap between Boris Johnson and the Conservatives.
This is something that investors had been wary of, and thus the GBP dipped as Tory majority confidence declined. Rightly so, as recent YouGov polls had been suggesting that a Labour catch-up may have been possible, with a hung parliament potentially on the cards.
Should a hung parliament been the case, then the uncertainty and instability that GBP had faced so far with Brexit would have likely continued until a deal could be struck. What the markets were hoping for was a Tory majority that will see the Conservatives deliver Brexit and provide a clear path for the future of the UK economy.
This was exactly the case and the markets are pleased with it. GBP’s strength has risen and set about claiming its place back in top position. The likelihood of Brexit occurring in early 2020 is back on the table and investors are optimistic about the UK’s future going forward.
CAD/GBP Rate Improves as Canada Cashes in on Fed Reserve Decision and GBP Declines
The pre-election nerves and post-election confusion has been positive news for the CAD/GBP exchange rate investors. With the GBP slipping the CAD has begun to edge over the GBP. Added to this, the news from the US Federal Reserve who stated that they had no intentions of raising interest cut rates for 2020.
This news was positive for the CAD as the currency is closely linked with the US economy and good news for the US is also positive for the CAD. The boost in confidence for the US also boosted the global economy as the US is one of the world biggest players in the trading market. The ‘Loonie’ also gained further support as the US-Canada trade agreement was clarified.
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