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Political Turmoil and Canada Rate Hike Causes GBP/CAD to Plummet

Last week’s high: C$1.7131

Last week’s low: C$1.6731

Pound to Canadian Dollar Exchange Rate Slumps Two Cents on Brexit Jitters

Low levels of risk sentiment limited CAD strength on Friday, but the Pound to Canadian Dollar exchange rate still saw significant losses throughout the week.

For most of the week, GBP/CAD moved lower due to concerns that the UK and EU would not be able to reach a Brexit deal, or that UK MPs could block such a deal even if it was agreed.

As October draws to an end and Brexit negotiations remain in a deadlock, governments and businesses are beginning to discuss the preparations that may be needed in the event of a possible no-deal Brexit.

The Canadian Dollar capitalised on the Pound’s weakness on Wednesday as the Bank of Canada (BoC) took a more hawkish tone on monetary policy than investors expected and raised interest rates. The BoC is now predicted to ramp up the pace of its interest rate hikes.

The Canadian Dollar’s rally was short-lived, however, with the currency’s appeal weighed down towards the end of the week by global risk-aversion, as poor performance as investors sought safe havens.

CAD Outlook: GBP/CAD Gains Unlikely to be Significant without Brexit Breakthrough

Some notable UK news will come out this week, including the UK Autumn Budget today and the Bank of England’s November policy decision on Thursday.

However, even if these impress investors they are unlikely to give the Pound much more than a limited boost in demand as persistent Brexit fears keep a lid on the Pound’s appeal.

Unless there is a major breakthrough of some kind in UK-EU Brexit negotiations, the Pound’s potential for gains remains limited. The Canadian Dollar is more likely to drive GBP/CAD movement this week as a result.

Notable Canadian data will be published in the second half of the week, with Canadian growth data publishing on Wednesday, manufacturing PMI stats and Canada’s October job market results on Friday. Of course, the trade-correlated Canadian Dollar could also be influenced by any shifts in risk sentiment.

 

Key Events

29th October

10:30 UK Mortgage Lending and Approvals

16:30 UK Autumn Budget

31st October

01:01 UK GfK Consumer Confidence

13:30 Canadian Growth Rate

1st November

10:30 UK Manufacturing PMI

13:00 Bank of England Policy Decision

13:30 BoE Governor Carney Speech

14:30 Canadian Manufacturing PMI

2nd November

10:30 UK Construction PMI

13:30 Canadian Trade Balance

13:30 Canadian Job Market Report

 

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To keep up to date with the Canadian Dollar, visit the CAD blog in our Currency News section.

Alastair Archbold

Currency Trader

aja@fcgworld.co.uk     

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