Pound Sterling (GBP) Exchange Rate Plummets as DUP Derails Brexit Agreement
The Pound to Canadian Dollar (GBP CAD) exchange rate continues to retreat from six-month high as a possible Brexit deal was scuppered by Northern Ireland’s Democratic Unionist Party (DUP)
The Pound is tumbling again this morning, relinquishing almost the entirety of its gains recorded over the past couple of weeks amid more delays to the UK exit agreement.
While Sterling sentiment picked up again on Monday morning as the UK government’s concession on the Irish Border looked set to open the way for an exit agreement to be signed, confidence in the currency plummeted again by the afternoon after the DUP rejected the proposals.
While the UK government was willing to allow Northern Ireland to remain in the EU customs union to avoid a ‘hard border’ with the Republic of Ireland, the DUP said it would not accept a deal which would see Northern Ireland treated differently from the rest of the UK.
Markets fear that this could lead to further delays to the start of Brexit trade discussions if an agreement is not finalised by the time EU leaders convene at a summit later this month.
PM Theresa May Confident of Brexit Deal Being Reached
However, PM May seem optimistic on the chances of a deal being reached by the end of the week as she said;
‘There are a couple of issues, some differences do remain, which require further negotiation and consultation. And those will continue but we will reconvene before the end of the week and I am also confident we will conclude this positively.’
Canadian Dollar (CAD) Exchange Rates Lifted by Rising Oil prices
The drop in the Pound comes at the same time as the Canadian Dollar is strengthening thanks to an uptick in oil prices, with the commodity holding above $62 a barrel.
The recent jump in oil prices has largely been driven by the extension of OPEC-led production cuts announced last week, with investors hopeful that this will help to further deplete global crude stocks.
Adding additional support to oil markets today are expectations that data will show that US crude inventories will have fallen for a third consecutive week, further denting the global surplus.
GBP CAD Exchange Rate Forecast: Brexit Concerns to Overshadow Data?
Looking ahead, movement in the GBP CAD exchange rate is likely to remain closely tied to Brexit sentiment over the coming days as investors try and discern the likelihood of a deal being reached ahead of the EU summit.
On the data front the most notable release this week will be the UK’s latest trade balance and accompanying industrial production figures, with an improvement in either possibly helping the Pound to claw back some ground at the end of the week.
Meanwhile, the Canadian Dollar may strengthen again on Tuesday as analysts forecast that the Canada’s own trade data will reveal a decline in the national trade deficit.
Also likely to impact the ‘Loonie’ this week will be the Bank of Canada’s (BoC) latest policy meeting on Wednesday.
While the BoC is not expected to make any policy changes this month, the Canadian Dollar may strengthen if the bank hints at the possibility of further rate hikes in 2018.