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Revived Brexit Fears Cause GBP/CAD Losses despite Market Risk-Aversion

Last week’s high: C$1.7723

Last week’s low: C$1.7492

 

Bumper Canadian Jobs Report Helps Boost ‘Loonie’ amid US-China Trade Jitters

Last week, investors sold the Pound as hopes of a Brexit solution faded and were replaced with fresh UK political uncertainty. As EU elections approach later this month and the ruling Conservative Party is expected to shed support, the Pound is tumbling on expectations of more months of Brexit uncertainty.

However, the Canadian Dollar’s potential for gains was limited for most of the week, as trade tensions between the US and China worsened, making investors hesitant to buy risk-correlated currencies like the Canadian Dollar.

The Canadian Dollar did see a late-week boost in support when April’s job market report was published during Friday’s session, with every notable print far more impressive than expected. A surge in new job creation left the unemployment rate lower.

This strong report bolstered market confidence in the Bank of Canada’s (BoC) solid economic outlook.

 

CAD Outlook: Canadian Inflation Takes Focus amid Political Uncertainty

Pound movement is likely to remain fairly limited over the next week as investors do not expect any major developments in Brexit. UK politics will increasingly take focus as the EU elections approach, but unless there are political surprises they may not cause much of a shift in movement.

As a result, the Canadian Dollar may be more likely to drive Pound to Canadian Dollar exchange rate movement, with key Canadian data due for publication during Wednesday’s American session.

Canada’s April inflation data could cause a surge in Canadian Dollar demand if it prints above expectations, as this would boost Bank of Canada (BoC) interest rate hike bets.

While Canadian data will be influential, US-China trade negotiations and other news influencing market trade-sentiment may also cause some Pound to Canadian Dollar exchange rate movement this week.

 

Key Events

14th May

09:30 UK Job Market Report

13:30 Canadian New Motor Vehicle Sales

15th May

13:30 Canadian Inflation Rate

16th May

13:30 Canadian Manufacturing Sales

13:30 Canadian Foreign Securities

17th May

13:30 Canadian ADP Employment Change

 

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

 

Alastair Archbold

Foreign Exchange Manager

aja@fcgworld.co.uk

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