The Pound-Canadian Dollar exchange rate could extend its recent gains if US-Canada trade tensions deepen, although firmer oil prices may offer the Loonie some support.
The Pound Canadian Dollar (GBP/CAD) exchange rate rose sharply on Monday, hitting its highest level in 17 days, as a trade war erupted between the US and Canada.
At the time of writing, GBP/CAD was trading at CA$1.8855, up 0.4% on the day and at its highest level in over two weeks.
DAILY RECAP:
The Canadian Dollar (CAD) faced heavy selling pressure on Monday as markets reacted to a breakdown in US-Canada trade talks.
Negotiations collapsed on Friday, with Washington imposing 50% tariffs on $20bn worth of Canadian goods. Canada retaliated, plunging the North American countries into a trade war.
Concerns about how this could impact the Canadian economy weighed heavily on CAD on Monday, as the US is Canada’s largest trading partner.
Meanwhile, a drop in oil prices also put pressure on the crude-linked ‘Loonie’.
Turning to the Pound (GBP), Sterling was muted on Monday amid a lack of UK economic data.
This left the British currency to trade without a clear overall direction, with Sterling facing mixed movement against its peers.
Near-Term GBP/CAD Forecast: US-Canada Trade War to Weigh on the ‘Loonie’?
Looking forward, the only economic data due Tuesday is Canada’s preliminary wholesale sales for July. A forecast 1.3% slump in sales growth could pressure the ‘Loonie’.
However, CAD investors may be focused on US-Canada trade tensions and oil price dynamics. Concerns about an escalating trade war could pile pressure on the Canadian Dollar, while CAD could find some cushioning if oil prices rise amid the conflict in the Middle East.
As for the Pound, UK economic data is in short supply. As a result, movement in Sterling may be limited.
Our currency coverage draws on live market data, official economic releases and published bank research.
