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Surge in Canadian Job Market Activity Diminishes BoC Concerns

Last week’s high: C$1.7160

Last week’s low: C$1.6731

GBP/CAD Gains Limited by Canadian Data despite Market’s Risk-Aversion

Last week turned out to be a busy one for the Canadian Dollar. While there were many unexpected Brexit developments that worsened Brexit uncertainties and left the Pound more volatile, the Pound to Canadian Dollar exchange rate’s movement was driven largely by market risk-sentiment and Canadian news throughout the past week.

At the beginning of the week, investors piled into risky trade-correlated currencies like the Canadian Dollar in reaction to news that the US and China had announced a 90 day truce on further trade action against one another. However, market optimism towards the truce was short-lived as US President Donald Trump maintained his fiery rhetoric, calling himself “Tariff Man”.

US-China tensions escalated further when Huawei’s Chief Financial Officer, Meng Wanzhou, was arrested in Canada. Huawei is one of China’s biggest global companies.

These risk-off factors, which combined with some surprising dovishness from the Bank of Canada (BoC), left GBP/CAD near multi-week highs until Friday afternoon – when strong Canadian data helped the Canadian Dollar to recover.

A surprisingly sturdy Canadian jobs market report from November saw the nation’s unemployment rate unexpectedly sink from 5.8% to 5.6%, and the employment change figure surge from 11.2k to 94.1k.

The Canadian Dollar found further support on Friday as the price of oil, Canada’s biggest export, surged. The oil price rise came in response to news that OPEC was getting closer to reaching a deal to cut production.

CAD Outlook: Parliament’s Brexit Vote to be Major Event for Pound to Canadian Dollar Exchange Rate

Some notable UK and Canadian data will be published this week, but following last week’s strong Canadian jobs data the Pound to Canadian Dollar exchange rate is unlikely to gain much unless the Brexit outlook improves.

In what will be a major week for the Brexit process, the Pound outlook is likely to be influenced by the aftermath of Parliament’s vote on Theresa May’s negotiated Brexit plan.

Unless the vote is delayed, the parliamentary vote will be held on Tuesday. Markets expect the deal will be blocked, potentially handing more power over the Brexit process to Parliament going forward.

There are many potential outcomes, including attempts to renegotiate the deal, a change in government or general election, a ‘no-deal Brexit’ or even a second EU referendum. The path Parliament and the government takes is likely to set the tone for Pound movement.

The Canadian Dollar is unlikely to be as influential this week as upcoming Canadian data will not be hugely influential. However, any surprising shifts in risk-sentiment, potentially caused by developments in US-China trade relations, could cause GBP/CAD movement too.


Key Events

10th December

09:30 UK Trade Balance

09:30 UK Growth Rate

09:30 UK Manufacturing and Industrial Production

13:15 Canadian Housing Starts

13:30 Canadian Building Permits

11th December

UK Parliament Vote on Brexit

09:30 UK Job Market Report

13th December

13:30 Canadian New Housing Price Index


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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

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