Pound Sterling Loses Edge over Canadian Dollar as Risk Appetite Returns

Pound to Canadian Dollar Outlook: Investors Favour Upside Following GBP Strength Boost

As the new trading week got underway yesterday, the pound saw a drop against CAD, following an increase in market risk appetite. The increase in the market’s risk appetite arrived after fears concerning the Coronavirus (Covid-19) decreased after signs of a slowdown in infection rate were displayed by China. This has given the market hope that the impact caused by the disease may slowly be concluding as the CAD looks to edge its way back up in the market rankings as risk appetite returns, sending investors towards the Canadian dollar. However, many are still anxious of the risk of a resurgence, as well as the long-term effects of the slowdown which are yet to be felt by economies across the globe.

GBPCAD exchange rate falls as market risk appetite returns

The pound to Canadian dollar interbank exchange rate fell by -0.5% yesterday, and the pairing finished up trading last night at around CA$1.720. This followed muted fears over China’s coronavirus outbreak, which bolstered oil prices and boosted the risk-correlated CAD. The spike in oil prices has helped the Canadian dollar as oil is the currency’s largest export. Speaking about the outbreak, Ray Dalio, a co-chief of investment highlighted that the outcome of the virus will be like that of the SARS outbreak, but on a larger scale. He noted that the virus will have a significant temporary effect, but it won’t have a long-term influence. Therefore, he suggests the downward market prices moves related to it are probably ‘exaggerated’. With Canada’s economy being closely correlated to effects on the global supply chain reaching back to China, any signs of the coronavirus’ spread slowing down will be beneficial in aiding the Canadian dollar’s rebound.

GBP suffers further losses as no-deal Brexit fears remain

The GBP didn’t help itself against the CAD’s gains following the release of the French foreign minister, Jean-Yves Le Drain’s comments which suggested the UK-EU post-Brexit trade talks will result in the two ripping each other apart. This was not something investors wanted to hear, and subsequently, led to the GBP falling in support as fears of a no-deal Brexit were made very much a reality. In terms of economic releases, the February Rightmove House Price Index was released yesterday which saw a 0.8% rise, with the YoY figure rising by 2.9%. This should have supported sterling but with fears of a no-deal Brexit being heightened, the positive data was overshadowed.

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