Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rises on Hopes of a Brexit Deal Breakthrough

December 9, 2020 - Written by John Cameron

STORY LINK Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rises on Hopes of a Brexit Deal Breakthrough

GBP/CAD Exchange Rate Heads Higher as Brexit Talks Show Signs of Progress

The Pound to Canadian Dollar (GBP/CAD) exchange rate rose today, with the pairing currently fluctuating around CA$1.71.

The Pound (GBP) gained following promising news of a possible post-Brexit trade agreement between the UK and the EU.

Downing Street has compromised on issues around fishing rights and the controversial – and international law-breaking – Northern Ireland bill, with the two sides no agreeing on the Northern Ireland Protocol.

Michael Gove, the British Senior Cabinet Minister, said that this had provided a ‘smoother glidepath’ to a trade deal between the UK and the EU.

Consequently, the GBP/CAD has risen on hopes that the UK economy could be in for a less turbulent 2021, should the two sides form a free trade agreement.

Meanwhile, the UK’s Covid-19 vaccine rollout has boosted confidence in the British economy.

The vaccine means that the UK economy could open further, with vulnerable members of the public being made effectively immune to the Covid-19 virus following a vaccination.

Canadian Dollar (CAD) Slips on Sinking Oil Prices

The Canadian Dollar (CAD) has suffered from sinking oil prices today, with the WTI falling and weakening demand for the commodity linked ‘Loonie’.

Julianne Geiger, an analyst at Oilprice.com, explains:

‘WTI was trading down. Oil prices remain under pressure from extended lockdowns in many places in the United States, while crude inventories in the United States are still high for this time of year.’

Meanwhile, the Bank of Canada (BoC) held interest rates at 0.25%.

Analysts at ING commented:

‘Today, we received confirmation that the Bank of Canada will not step in the way of further CAD appreciation as the improving financial and economic conditions leaves no need for extra monetary stimulus in the foreseeable future.’

Nevertheless, the outlook for Canada’s economy remains largely uncertain going ahead, despite confidence that growth could be stronger in the fourth quarter than previously expected.

As a result, this has limited the Canadian Dollar, which is particularly sensitive to oil prices and global risk sentiment.

GBP/CAD Forecast: Brexit Developments in Focus

The Canadian Dollar (CAD) will remain sensitive to oil prices this week. As a result, we could see the ‘Loonie’ continue to slide if oil prices continue to fall.

GBP investors will be monitoring tomorrow’s release of the latest UK GDP data for October.

If this points to a stronger performance in the UK’s economy in October, then we could see Sterling rise.

Tomorrow will also see the release of the UK’s industrial and manufacturing production data for October.

However, any signs of flagging in either of these sectors would be GBP-negative.

Brexit news will continue to heavily influence the GBP/CAD exchange rate, however.

Any signs of progress towards a possible post-Brexit trade deal would boost Sterling.

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TAGS: Canadian Dollar Forecasts Pound Canadian Dollar Forecasts