The Canadian dollar vs pound interbank exchange rate has hit its highest in 23 months today, or since September 8th 2017, at 0.6275.
By comparison, back on March 20th 2018, the Canadian dollar was as weak as 0.5430. So it’s since strengthened by close to +8.5 cents, or by +15.56%.
This may be useful information for you, if you’re a Canadian emigrating or buying property abroad in the UK, or a Canadian business owner importing British products.
This is because, when you exchange Canadian dollars for pounds, you might now get a higher sterling total in your UK bank account, compared to the past 23 months.
In turn, this could make it cheaper for you to emigrate or buy property abroad in the UK, or cut your international payments costs to ship British goods to Canada.
To stay updated with the Canadian dollar vs pound interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, select ‘CAD’ to ‘GBP’ to see the interbank rates for the last week.
Also, to check what’s affecting the value of the Canadian dollar versus the pound, visit our CAD to GBP Exchange Rate Updates page. Here, simply click on the most recent article.
A first reason why the Canadian dollar vs pound interbank exchange rate has reached this 23-month high is because the UK economy shrank over the Spring, it’s been revealed today.
A second factor why the CAD has strengthened in value against the GBP is because there are growing concerns that Boris Johnson might try and force through a ‘No Deal’ Brexit.
However, looking to the near future, the loonie dollar to British sterling interbank exchange rate might be affected by the fact that Canada’s unemployment rate unexpectedly rose in July.
Please find below a more detailed explanation of these factors that have lifted the Canadian dollar vs the pound. You might find this helpful, for when you transfer money to the UK.
Canadian Dollar vs Pound Rate Rises, as UK GDP Surprisingly Shrinks in Q2
As I mention, a first factor why the Canadian dollar has reached this 23-month high versus the pound is because the UK economy unexpectedly contracted over the Spring, said official statistics today.
This has raised concerns that the UK economy is decelerating, both because of the global economic slowdown, and the rising probability that we’ll exit the EU without a deal by Halloween.
According to the UK’s Office for National Statistics (ONS) today, the UK economy shrank by -0.2% in Q2, between April and June, compared to three months earlier.
This is the first time that UK GDP (Gross Domestic Product) has fallen since the last three months of 2012, six-and-a-half years ago. By comparison, UK GDP expanded by a much healthier +0.5% in Q1 this year.
Economists and the financial markets had forecast that UK GDP would stagnate between April and June, so this tells us that the UK’s economy underperformed expectations.
The UK economy contracted in Q2, in particular because UK factory activity wound down. This is because, in the run up to the UK’s original Brexit deadline of March 31st, UK’s manufacturing produced far more than usual, to build up stockpiles.
However, since then the deadline has been extended to October 31st, and the stockpiles are being wound down, thus slowing factory output.
In addition, UK GDP contracted between April and June, because the UK’s vehicle manufacturing industry brought forward their annual planned shutdowns to April.
Again, this was to avoid disruption ahead of the UK’s original Brexit deadline. Lastly, it’s worth noting that Britain’s vast services sector, which makes up 80% of the economy, barely expanded in Q2 either.
These figures have weakened the value of sterling, because they suggest that Brexit weighed down the UK economy more than predicted over the Spring, and we’ve yet to even exit the EU.
For instance, Chris Williamson, chief business economist at IHS Markit, described the UK as “skirting with recession” and “exacerbated by a Brexit-related paralysis".
Meanwhile, Alpesh Paleja, the Confederation of British Industry’s Lead Economist, said about this data that: "underlying momentum remains lukewarm, choked by a combination of slower global growth and Brexit uncertainty."
In addition, Rob Kent-Smith, head of GDP at ONS, said that: "the often-dominant service sector delivered virtually no growth at all" between April and June.
Following the release of these growth statistics, the financial markets have lifted the odds that the Bank of England (BoE) will cut interest rates in January up to 70%. That month, the BoE’s widely-respected Governor, Mark Carney, is due to leave.
So these facts, along with the UK’s slowing economy, have contributed to lift the Canadian dollar vs pound interbank rate too.
CAD to GBP Rate Gains, on Fears That Boris Might Force Through ‘No Deal’ Brexit
In addition, another factor why the Canadian dollar to pound interbank exchange rate has reached this 23-month high is because the financial markets are increasingly concerned that UK Prime Minister Boris Johnson might try and force through a ‘No Deal’ Brexit.
Investors are worried that a ‘No Deal’ Brexit could slow the UK’s economic growth, more than if we leave with a deal.
The financial markets are concerned that Mr. Johnson might try and push through a ‘No Deal’ Brexit, because this week, the Prime Minister’s Special Advisor, Dominic Cummings, said that even if Mr. Johnson loses a vote of ‘No Confidence’, he’d stay on as Prime Minister.
This would break a centuries-old political convention, and could trigger a UK constitutional crisis.
According to Mr. Cummings, Mr. Johnson could remain PM after losing a ‘No Confidence’ vote, because the legislation doesn’t actually say that the Prime Minister has to resign.
Instead, technically, Mr. Johnson could remain at Number 10 Downing Street, until after the UK’s extended Brexit of October 31st passes, at which time we’ll leave without a deal by default.
Moreover, reports have emerged this week that, if Mr. Johnson loses a vote of ‘No Confidence’ ahead of the Brexit deadline, he could manipulate political convention to ensure a ‘No Deal’.
To explain, according to UK political norms, when the Prime Minister calls a general election, Parliament dissolves 25 working days before polling day, so that MPS can go to their constituencies and campaign.
However, if Mr. Johnson loses a ‘No Confidence’ vote, in which case he’d be expected to call an election, the Prime Minister might leave this until 25 working days before the Brexit deadline.
In this case, the House of Commons wouldn’t be sitting in the run up to October 31st, preventing MPs from stopping Mr. Johnson forcing through a ‘No Deal’ Brexit automatically.
Given this possibility, the leader of the opposition Labour Party, Jeremy Corbyn, has today written to the UK’s most senior civil servant, the Cabinet Secretary Sir Mark Sedwill, to rule that the government cannot force through a ‘No Deal’ Brexit while Parliament is in recess ahead of an election, reports the BBC.
Instead, Mr. Johnson’s government should request a short extension to Article 50, argues the Labour leader.
In Mr. Corbyn’s letter, he writes that taking advantage of the rules about general elections to push through a ‘No Deal’ Brexit would be an "anti-democratic abuse of power", “unprecedented”, and “unconstitutional”.
Mr. Corbyn argues that, once an election has been called, it’s the responsibility of the next government to make policy decisions, including regarding Brexit.
The Cabinet Office has released a statement saying that Sir Sedwill will reply “in due course”. However, for the moment Prime Minister Johnson has refused to rule out announcing an election ahead of the Brexit deadline.
When the Prime Minister was asked about this, he dodged the question. So this rising UK political turmoil has also contributed to weaken the pound sterling.
Loonie Dollar to Pound Might Be Affected, as Canada’s Unemployment Rises
However, looking forward, the Canadian dollar vs pound interbank exchange rate might be affected by the fact that Canada’s unemployment rate surprisingly rose in July, said official statistics today.
This could influence the value of the Canadian dollar, because this points to an unexpected weakening in Canada’s labour market, as thousands of Canadians lost work.
According to Statistics Canada earlier today, Canada’s unemployment rate rose by +0.2% in July compared to a month before, up to 5.7%.
This was below economists’ predictions for Canadian joblessness to remain steady last month, at 5.5%. In particular, Canada’s unemployment increased, as -24,200 Canadians became jobless, well below forecasts for a +12,500 rise in employment.
Overall, in the last three months, Canada’s economy has created on average just 400 new jobs a month. This is the weakest stretch of job creation since early 2018. In particular, of Canada’s provinces, Alberta, Nova Scotia and New Brunswick all shed jobs in July, reports CBC.
In addition, Canada’s labour force participation rate unexpectedly dropped last month too, by -0.1% to 65.6%. So looking ahead, this could influence the value of the Canadian dollar.
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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email email@example.com.