The GBP/CAD cross reached fresh 6-month highs in early trading on Thursday. The British Pound has been lifted by strong odds of a Conservative party majority at the December 12th general election. Meanwhile, the Canadian dollar has been under pressure amid rising rate cut expectations.
Election Debate
Tuesday’s televised election debate between party leaders Boris Johnson and Jeremy Corbyn was carefully scrutinized by investors for signs that could shift opinion among voters. A YouGov snap poll following the debate showed that viewers were split down the middle, with 51% judging Johnson to have won versus 49% for Corbyn. Sterling has shown a positive correlation with increasing odds of a Conservative majority, due to the market perception that a Conservative victory will most likely dispel the uncertainty surrounding Brexit. The steady performance by Johnson at the debate helped to underpin the British currency.
BoC Dovish Tone
On the other side of the Atlantic, comments from Bank of Canada Senior Deputy Governor Carolyn Wilkins raised expectations of an imminent rate cut. In a speech on Tuesday at the International Finance Club of Montréal she cited concerns over the US/China trade war and stated:
"Our policy interest rate may be relatively low now, but at 1.75 per cent we still have room to manoeuvre. And, we have other options in our tool kit, such as extraordinary forward guidance and large-scale asset purchases."
The Canadian dollar sold off in the wake of the remarks, with USD/CAD falling to its lowest levels since October 10th on Wednesday. Potential resistance in GBP/CAD lies above at the prior low of 1.7311.
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