Pound to Canadian Dollar Exchange Rate Sheds Most of Last Week’s Impressive Gains
There’s no resolution to the Brexit process in sight, but Britain is still set to leave the EU at the end of next week. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has plummeted as fears of a worst-case scenario no-deal Brexit return.
While GBP/CAD has avoided falling back to last week’s opening levels due to weakness in the Canadian Dollar (CAD), the pair has still lost over two cents since opening this week at the interbank level of 1.77.
GBP/CAD trended less than a cent above last week’s opening levels at the time of writing, as no-deal Brexit fears returned due to a lack of a perceived solution to the current issue facing the UK government’s Brexit plans.
The EU has given the UK an ultimatum: if it wants a short Brexit delay, it must pass the negotiated Brexit plan by the end of next week.
Pound (GBP) Exchange Rates Battered as No-Deal Brexit Fears Revive
Until yesterday, markets had hoped that the chances of a no-deal Brexit had all but faded due to votes Parliament held last week.
However, no-deal Brexit fears returned with a vengeance yesterday.
UK Prime Minister Theresa May said yesterday that she would not, as Prime Minister, allow Brexit to be delayed past June.
With just over a week until the UK is set to formally leave the EU, European Council President Donald Tusk said he would only allow a short delay on Brexit if Britain passes its Brexit deal before the end of next week.
The government’s Brexit plan still lacks the support to pass through Parliament, especially after the Prime Minister appeared to criticise MPs during a speech about the Brexit delay last night.
As the Brexit plan lacks support but needs to pass in just a week to avoid a no-deal Brexit, no-deal Brexit fears returned and throttled the Pound.
Canadian Dollar (CAD) Exchange Rate Strength Limited by Lack of Domestic Support
Demand for the Canadian Dollar (CAD) has been limited this week, making it more difficult for the currency to regain all of the losses it saw versus the Pound (GBP) last week.
While global and geopolitical factors have supported Canadian Dollar movement and the currency has seen fairly solid support this week overall, it was unable to see further gains versus Sterling due to a lack of supportive Canadian news over the past week.
Some decent Canadian manufacturing data on Friday was not enough to offset concerns that Canada’s economy is not growing quick enough to support more hawkish monetary policy from the Bank of Canada (BoC) this year.
Due to lingering concerns about Canada’s economy, the Canadian Dollar’s benefit from higher market risk-sentiment was limited.
Stronger prices of oil, Canada’s most lucrative commodity, as well as a dovish tone from last night’s Federal Reserve policy decision, made investors more willing to take risks. This offered some support to the ‘Loonie’.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate May See Further Losses on Brexit Panic
Officially, the UK is still set to leave the EU next Friday – the 29th of March.
The chances of a deal being agreed to by then are slim, but the EU will not allow the short Brexit delay that the government wants without the deal being agreed within the next week.
If a deal is not agreed, then the default outcome is a worst-case scenario no-deal Brexit.
Unless the government changes course, or the EU allows an extension anyway, the Pound (GBP) is in for further losses as markets will be engulfed in panic of a potential no-deal Brexit.
Every session over the next week will be key for the Pound outlook, and further losses are likely unless some kind of solution is presented.
With the Pound’s volatility likely to remain high, the Canadian Dollar (CAD) will be able to more easily push GBP/CAD lower if upcoming Canadian data impresses investors.
Friday will see the publication of this week’s most influential Canadian data. Canada’s February inflation rate figures and January retail sales could push the Pound to Canadian Dollar (GBP/CAD) exchange rate even lower if they impress investors.