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Pound Canadian Dollar Exchange Rate News: Brexit Optimism Catapults GBP/CAD to Three-Month High

September 13, 2019 - Written by James Fuller

Pound Sterling raced higher on Friday, surging over 1% to strike a three-month high against the Canadian Dollar.

© - GBP/CAD exchange rate chart

This upswing in the Pound comes hot on the heels of a report in The Times suggesting the Democratic Unionist Party (DUP), a key ally of the government, would be willing to abide to some EU rules post Brexit.

This spurred hopes that an alternative agreement could be found to Irish backstop, potentially paving the way for a breakthrough in Brexit talks between the UK and EU.

While the DUP was quick to dismiss the report, Sterling held on to its gains on the renewed hopes that the UK could avoid a no-deal Brexit.

Also buoying the Pound were separate reports suggesting that members of Boris Johnson’s cabinet have been urging the PM to comply with a recent parliamentary vote requiring him to ask for another Brexit extension rather than risk breaking the law.

Weak Oil Prices Undermine the Canadian Dollar (CAD)

At the same time, the Canadian Dollar (CAD) struggled to hold off a resurgent Pound (GBP) on Friday as the oil-sensitive currency was undermined by a persistent slide in crude prices.

Oil prices have fallen for the last three days, bringing Brent crude back below $60 a barrel amid growing concerns of a supply glut.

In its monthly market report the International Energy Agency suggested that stocks will begin to rise again as we head into 2020.

The IEA report read:

‘While the relentless stock builds we have seen since early 2018 have halted, this is temporary. Soon, the Opec+ producers (Opec and Russia) will once again see surging non-Opec oil production with the implied market balance returning to a significant surplus placing pressure on prices.

‘The challenge of market management remains a daunting one well into 2020.’

Oil product make up roughly 20% of Canada’s total exports, so any weakness crude prices can have an inverse effect on the Canadian Dollar.

GBP/CAD Exchange Rate Forecast: UK Politics, Inflation and BoE in Focus Next Week

Looking ahead to next week, we may see UK political headlines continue to make waves in the Pound Canadian Dollar (GBP/CAD) exchange rate.

On the data front GBP investors will have to contend with the UK’s latest CPI figures, with an expected drop in inflation last month potentially dragging on Sterling sentiment.

This will be followed by the Bank of England’s (BoE) latest rate decision on Thursday.

While no policy changes are expected from the bank this month as it awaits more clarity on Brexit, we could still see the BoE’s economic outlook influence GBP exchange rates.

For CAD investors the focus is likely to be on Canada’s own inflation figures, with another robust reading possibly underpinning a recovery in the ‘Loonie’.

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