-GBP / CAD lcoked in the range trade between 1.7272, 1.7416.
-Opens at the top of the beach but may fade over viral measurements.
-Extended lockdown, PMIs risk a soft start for GBP / CAD.
-Brexit developed afterwards, can see 1.7641 on progress.
Image © Adobe Stock.
- GBP / CAD spot rate at time of writing: 1.7401
- Bank transfer rate (indicative guide): 1.6792-1.6914
- Specialized foreign exchange suppliers (indicative guide): 1.7140-1.7244
- More information on FX Specialist pricing here
The pound-to-Canadian dollar exchange rate enters the new week near its three-month highs, but risks pulling back as investors digest the latest developments of the coronavirus in the UK, as Brexit talks on-going and the trajectory of the stock markets will be key influences on the following days.
The British pound was lifted higher last week amid speculation that a Brexit trade deal could be reached over the next few days, leaving GBP / CAD close to 1.74 and three highs months, although it risks a setback on Monday when investors assess the likely cost of improvement. and prolonged containment measures against coronaviruses.
Meanwhile, the USD / CAD enters the new week in a neutral position around the middle of a range expected by local analysts, which would be enough to place the sterling to Canadian dollar rate in a vulnerable position. right from the start even without the risks involved with the pound sterling.
An effective extension of the British “ lockdown ” and IHS Markit PMI surveys, which should provide an early estimate of the damage already done to the economic recovery by the national shutdown in November, will set the stage on Monday morning for the pound sterling.
“The coming week is likely to see the short-term pattern of the CAD tracking US stocks closely repeat,” said Shaun Osborne, chief currency strategist at Scotiabank. “Our coming week pattern continues to signal modest upside risks for the USD next week (1.3085) in a wide range of large double digits on either side.”
Scotiabank sees the main pound GBP / USD exchange rate supported around 1.32 in response to the weakness which, combined with the expected average of 1.3085 for the USD / CAD in the coming days, implies a drop in GBP / CAD to around 1.7272 if the pound falls out of favor with investors.
Above: British Pound to Canadian Dollar rate displayed at daily intervals next to USD / CAD (black line, left axis).
The GBP / CAD ended the week at 1.74, although this marks the top of the British Pound’s likely range for the week ahead if a Brexit trade deal remains elusive and the GBP / USD is unable to cross the threshold of 1.3310.
“The GBP simply recovered its losses in yesterday’s session, which followed a short-lived surge above 1.33 on Wednesday as the big figure acts as a hard cap,” said Juan Manuel Herrera of Scotiabank. “The narrow range for the week appears to reflect weak conviction in the GBP extending its latest rally to its year high of 1.3482.”
If the British Pound is able to break through the 1.33 threshold against the Greenback and climb to September highs of 1.3482 while the USD / CAD is on average 1.3085, then the Pound rate the Canadian dollar would trade as high as 1.7641, although this may require tangible progress. towards a Brexit deal that was still lacking this weekend.
GBP / CAD forecast
Period: End of 2020 – Q3 2021
FX Guide for Businesses
“The USD / CAD pair has seen a steady downward trend during the second half of this week, as the loonie benefits from stabilizing oil prices and a still positive domestic data history (the good retail sales figures today are an example.) Next week we won’t see much on the national data front, so global developments and oil will likely remain the only drivers, ”says Francesco Pesole , strategist at ING. “USD / CAD can test the 1.3000 key support.”
The pressure on the GBP / CAD would be exacerbated if the USD / CAD fell to 1.30 and the British pound was unable to advance against the US dollar as well. But with the GBP / USD entering the new week close to resistance at 1.33 and vulnerable to lockdown-inspired weakness, this could also be unlikely without a firm Brexit advance.
“The fair value is now 1.3084. Our model continues to weight the S&P 500 as its best predictor of the USDDCAD, but the weight of SPX is declining as the weight of the Bloomberg Commodity Index is increasing, ”said Greg Anderson, CFA and Global Head of FX Strategy in BMO Capital Markets. “With the US election and possibly the biggest vaccine news now in the mirror, OPEC + could increasingly become the lifeblood of USDCAD. Unless OPEC + shows strong signs of breaking, we like to be short of USDCAD above 1.3150, but we would reduce that position to around 1.3030 as we believe it will be difficult for the pair. to fall permanently below 1.3000 this year. “
Above: CAD / USD at daily intervals alongside the S&P 500 Index Futures (black line, left axis).
The catch for the pound, however, is that negotiators may have more time to strike a deal than previously thought after EU ambassadors were flagged down by RTE Friday to reflect on the idea of a “provisional application” which would see a last-minute agreement implemented in part without having been previously ratified by the parliament of each member state.
“If an agreement cannot be reached next week, the deadline will be pushed back to December. There is talk of having something ready for the EU Council on December 10, which the European Parliament could then ratify on December 16 Failing that, an emergency EU parliamentary session could be set for December 28 and, to top it off, the EU Council could ratify an agreement without reference to MEPs on December 31, ”says David Croy, strategist at ANZ.
Preventing the two sides from reaching a deal are the controversial demands by Brussels to retain and strengthen its influence and control over various British policy areas, even after December 31, when the transition to the status quo ends and the country is supposed to become independent from the block.
GBP / CAD forecast
Period: End of 2020 – Q3 2021
FX Guide for Businesses
With Brexit talks, coronavirus concerns and Monday’s IHS Markit PMI surveys aside, Sterling will take inspiration from Chancellor Rishi Sunak’s spending review on Wednesday, which will provide additional support for businesses and households as they struggle against tighter government restrictions on activity.
The Canadian dollar will draw inspiration from the stock markets it has followed closely for months as well as oil prices, which themselves may be sensitive to coronavirus developments in North America. The price action of the Euro will also be important, given its impact on the dollar index that the USD / CAD also tracks.
“In Canada, only payroll data is due, and since it is so far behind the household survey employment measure, it does not tend to be market players. Instead, all eyes will be on provincial leaders who are struggling to decide whether or not to continue to force activity in the face of a strong second wave of Covid-19, ”says Avery Shenfeld, chief economist at CIBC Capital Markets.
Above: CAD / USD at daily intervals alongside GBP / USD (black line, left axis). GBP / CAD price action is heavily influenced by the currency winning a continuous race against the US dollar.
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