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Pound Canadian Dollar GBP/CAD Exchange Rate Climbs on Reports of NAFTA Tensions

April 26, 2018 - Written by John Cameron

The Pound Canadian Dollar (GBP/CAD) exchange rate is edging higher today as sources suggest the US and Canada are clashing over the sunset clause in NAFTA negoiations.

Canadian Dollar (CAD) Slides on NAFTA Uncertainty



The Canadian Dollar found itself sliding against Sterling today following reports that Canada and America are butting heads over parts of a redrawn NAFTA deal.

Canadian Foreign Affairs Minister, Chrystia Freeland and her American counterpart, Robert Lighthizer are reported to have had a ‘fairly forceful’ exchange regarding Washington’s demand for a sunset clause.

The sunset cause would require all parties within NAFTA to re-committee to the agreement every five years or have the trade pact dissolved.

Canada suggests that this would undermine the agreement and is already covered by existing clauses within NAFTA.

Freeland said in advance of yesterday’s meeting;

‘Canada's position on the sunset clause is unchanged, our view is that this is absolutely unnecessary.’

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These new tensions have done little to quell the uncertainty around the trade agreement, something that is particular concerning for investors regarding its impact on the Bank of Canada’s monetary policy.

The BoC has repeatedly stated that another further monetary tightening must be reliant upon progress in NAFTA negotiations so the report of tensions is likely to dampen hopes of the bank delivering its next rate hike anytime in the near future.

Pound (GBP) Gains Trimmed by CBI Retail Figures



Meanwhile the Pound’s advance against the Canadian Dollar today has been limited somewhat by the release of the Confederation of British Industry (CBI) latest retail survey.

The CBI reported that its distributive trades index climbed from -8 to -2 in April falling well short of forecasts that it would strike 5 as retail activity failed to pick up as strongly as expected this month.

Markets were hopeful that the improved weather would contributed to increased activity this months as consumers ventured out once more after the snow at the start of March caused many to shun the high street.

However is appears there were more fundamental problems weighing on retail activity in recent months with not even the rise in real wages being enough to coax shoppers into spending more in April.

Anna Leach, Head of Economic Intelligence at CBI, said;

‘Sales have continued to disappoint in April, after falling in March.

It’s no secret that UK high streets have endured tough trading conditions in recent months, with some big names closing or cutting back. Much of this reflects ongoing structural changes in the sector as well as the continued squeeze on households’ real incomes.

While conditions have improved for households recently – with real wage growth inching into positive territory – we expect further gains in living standards to remain modest. So the pressure looks set to stay on retailers for the time being.’

GBP/CAD Exchange Rate Forecast: Drop in UK Growth Likely to Weaken Sterling



Looking ahead the GBP/CAD exchange rate is likely to tumble at the end of this week’s session as the UK publishes its latest GDP figures.

Following a run of softer-than-expected UK data over the last three months, economists forecast tomorrow’s preliminary GDP figures will reveal that the UK economy expanded by 0.3% in the first quarter of 2018, down from 0.4% in the previous quarter and striking its slowest pace of growth since Q2 last year.

This will be the last major data release ahead of the Bank of England’s (BoE) next rate decision and investors are likely to be concerned that another period of subdued growth is likely to further dampen the chances of the bank raising interest rates next month.

Meanwhile CAD investors are likely to turn their attention to next week and the release of Canada’s own GDP figures, with a possible rebound in growth in February likely to help buoy the Canadian Dollar.

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