December 16, 2020 - Written by John Cameron
STORY LINK Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rises on ‘Path to Agreement’ in Brexit Talks
GBP/CAD Exchange Rate Heads Higher on Brexit Talks Progress
The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.8% today, with the pairing currently trading around CA$1.722.
The Pound (GBP) rose today following the announcement that the UK would remain with relaxed Christmas Covid-19 rules despite nations being divided in the guidance.
As a result, GBP investors have become more optimistic about Britain’s economic recovery, even more now that Brexit talks are showing signs of progress.
The European Commission’s President, Ursula von der Leyen, said that a UK-EU trade deal was a possibility, but warned that fishing rights could still sink the chances of a deal by January 1st.
Von der Lyen said:
‘As things stand, I cannot tell you whether there will be a deal or not. But I can tell you that there is a path to an agreement now. The path may be very narrow but it is there.’
Nonetheless, Pound (GBP) investors are more hopeful that Downing Street’s recent concessions could improve the chances of a post-Brexit deal by the end of the year.
In UK economic data, today saw the release of the Markit Services PMI for December, which rose to 49.9.
Chris Williamson, Chief Business Economist at IHS Markit, was optimistic about the UK economy, saying:
‘The UK economy returned to growth in December after the lockdown-driven downturn seen in November, adding to signs that the hit to the economy from the second wave of virus infections has so far been far less harsh than the first wave in the spring.’
Canadian Dollar (CAD) Dips Despite Rising Oil Prices
The Canadian Dollar (CAD) struggled against Sterling today despite the oil-sensitive currency benefiting from a rise in WTI crude prices, which rose back above $47 a barrel.
As a result, ‘Loonie’ investors are more hopeful for the Canadian economic recovery, with Covid-19 rollouts boosting the value of the nation’s key and most lucrative commodity.
In Canadian economic news, today saw the nation’s annual inflation rate accelerate to 1.0% in November.
Doug Porter, Chief Economist at BMO Capital Market, commented on the data:
‘The Bank of Canada has told us they’re not going to hike rates until inflation gets sustainably above their target, and we’re still below their target.
‘But in the medium term, the resiliency of core does suggest that the bank may be forced to make a decision earlier than perhaps they thought.’
If oil prices continue to rise, however, we could see the CAD/GBP exchange rate begin to edge higher later today.
GBP/CAD Forecast: Could Rising Oil Prices Bolster the ‘Loonie’ This Week?
Sterling is likely to remain buoyed throughout the course of this week if Brexit talks continue to show progress between the UK and EU on critical issues of trade.
Any further signs that the UK and EU could concede on a post-Brexit trade agreement, therefore, would prove Pound-positive.
Tomorrow will also see the Bank of England (BoE) announce its interest rate decision.
However, with the bank expected to hold rates at 0.1%, any dovish commentary about the British economy would be detrimental to the GBP/CAD exchange rate.
Canadian Dollar (CAD) investors will be monitoring tomorrow’s release of the Canadian employment data for November.
Nonetheless, we could see the ‘Loonie’ rise if oil prices continue to climb over the next few days.
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