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GBP to CAD Exchange Rate Nears Worst Levels Again as Brexit Jitters Combine with Risk-Sentiment

February 14, 2019 - Written by James Fuller

The Canadian Dollar has been steadily gaining this week thanks to stronger commodity prices and rising market demand for riskier trade-correlated currencies. The British Pound to Canadian Dollar (GBP/CAD) exchange rate trended near its worst levels since last month as Brexit jitters made the Pound particularly unappealing.

Since opening this week at the level of 1.7174, GBP/CAD has spent most of the week tumbling. On Thursday near the time of writing, GBP/CAD hit a low of 1.6981. The pair has hit this level once earlier in the month, which is also the worst level in around a month – since the 15th of January.

Investors kept selling the Pound today, amid concerns that there had been no major developments in the Brexit process in recent weeks.

There are concerns that the UK government will face further obstacles in its plans to push through a soft Brexit during today’s Parliament Brexit debate.

As risk-sentiment has been stronger all week, the Pound’s weakness has made it easier for the relatively risky Canadian Dollar to rise.

GBP Exchange Rates Unappealing on Revived Brexit Uncertainty

Over the past few weeks, the UK government has been attempting to bolster the domestic popularity of its Brexit plan – which was blocked in Parliament in mid-January.

With UK Parliament set for another day of debate on Brexit today, analysts expect the government has not made any major advancements in boosting the popularity of its deal.

Essentially, with the formal Brexit date now only a month and a half away and the government no closer to a resolution than it was last month, markets are concerned that the clock will run out and lead to a worst-case scenario No-deal Brexit.

Some analysts do not expect today’s Brexit debate to have a big impact on Sterling, unless there is a surprising development such as an amendment that influences Brexit that finds enough support to pass.

According to Petr Krpata, Chief EMEA FX and Interest Rate Strategist at ING:

‘Today's vote in Parliament could prove a mild negative for GBP were news of another defeat to PM May to emerge (but) this vote is really only on whether Parliament backs May’s negotiating stance,’

This week’s UK data has only served to further pressure Sterling, as it has fallen short of expectations and dented Bank of England (BoE) interest rate hike bets.

CAD Exchange Rates Continue to Benefit from Oil Prices

Prices of oil, Canada’s most lucrative commodity, have been climbing this week as oil producing nations led by OPEC agreed to cut oil production in order to curb oversupply in the commodity and stimulate demand.

On top of this though, the relatively risky trade-correlated Canadian Dollar has been supported by optimistic signs from US-China trade negotiations.

US President Donald Trump has reportedly been considering pushing back the negotiation deadline by around 60 days, if it would push a trade deal to being completed.

Trade talks between the world’s two biggest economies have risen to a higher level this week. If talks go well, investors will be more confident that a deal can be forged rather than tensions between the nations worsening again.

This has made investors more willing to take risks, bolstering demand for the Canadian Dollar.

GBP/CAD Exchange Rate Forecast: Political Developments and Canadian Employment Figures Expected

Any surprising developments in the UK Parliament Brexit debate, or high-level US-China trade negotiations, are likely to drive the Pound to Canadian Dollar exchange rate towards the end of the week.

Any signs that the UK could be headed towards a softer Brexit or even a second referendum would make the Pound more appealing, while a lack of perceived process in Brexit will keep Sterling under pressure.

Canadian Dollar investors will find the relatively risky ‘Loonie’ more appealing if US-China trade negotiations go well, but if talks go poorly investors will find safe haven currencies more appealing and the Canadian Dollar will weaken.

Some data due for publication on Friday could be relatively influential too.

UK retail sales results and Canadian employment change data from ADP will be published and could cause some movement in the Pound to Canadian Dollar exchange rate before markets close for the week.
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