The Pound Canadian Dollar (GBP CAD) exchange rate is trending higher at the start of this week’s session on hopes that Theresa May will be able to break a ‘deadlock’ in Brexit talks when she meets EU officials for a dinner meeting later today.
Brexit Speculation Drives Pound Sterling (GBP) Exchange Rate Movement
The Pound Sterling (GBP) exchange rate gains recorded this morning followed increased volatility in the second half of last week as the latest round of Brexit talks concluded with the EU’s chief negotiator Michel Barnier saying that he was ‘disturbed’ by the ‘deadlock’ in negotiations over the UK’s divorce bill.
With EU leaders set to meet later this week to discuss whether enough progress has been made to allow Brexit negotiations to move to the next stage of talks, the remarks from Barnier were a bit of a death knell for the chances of UK-EU trade talks beginning before the end of the year.
However the news that Theresa May and Brexit Secretary David Davis will be meeting with Barnier and EU Commission Chief Jean-Claude Juncker on Monday in a bid to end the stalemate has helped Sterling push a little higher again this morning.
This follows reports that May spoke with German Chancellor Angela Merkel over the weekend on the ‘importance of continued constructive progress’ in negotiations over the UK’s exit from the EU.
NAFTA Doubts Weigh on Canadian Dollar
While the Pound is trading in a stronger position, the Canadian Dollar remains on the back foot today as fears over the possible disintegration of the North American Free Trade Agreement (NAFTA) hang over the Canadian currency.
This comes as US President Donald Trump warned last week that it was ‘possible’ that the US would drop out of the trade agreement as his administration issued a number of hard-line proposals on Mexico and Canada.
Fears that the agreement could collapse also offset a rally in oil prices as conflict between Iraqi and Kurdish forces in the oil rich regions near the city of Kirkuk prompted crude prices to rally at the start of this week’s session.
GBP CAD Forecast: Uptick in UK Inflation to Prompt Response from BoE?
It’s a busy session for UK data this week, but the release most likely to impact the GBP/CAD exchange rate is Tuesday’s CPI figures as economists forecast that the UK’s inflation rate will have risen from 2.9% to 3% in September.
Last month’s inflation data will likely be in particular focus tomorrow as it will be the final reading before the Bank of England’s (BoE) November policy meeting. As it stands, some economists predict the bank will move to raise interest rates from record low levels at the November gathering.
Meanwhile, Canada will release its own inflation data at the end of the week with the Canadian Dollar likely to see more modest gains should inflation lift from 1.4% to 1.6% as expected in September.