Pound Canadian Dollar (GBP/CAD) Exchange Rate Muted as Brexit Deal ‘Very Difficult’
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate was left muted today with the pairing currently trading at around CA$1.6262.
A report from The Times said the European Union was prepared to agree to a major concession in ongoing Brexit negotiations, revealing that the EU might allow a double majority in the Northern Ireland assembly to leave the European Union after an unspecified number of years.
The news did little to boost an ailing the Pound (GBP), with the GBP/CAD exchange rate unmoved following Tuesday’s report suggesting talks were close to collapse.
Irish Taoiseach Leo Varadkar claimed that language around the discussions had turned toxic ‘in some quarters’ and stated it will be ‘very difficult’ to reach an agreement before the Halloween deadline.
Currency strategist at MUFG, Lee Hardman commented:
‘By allowing Northern Ireland to take the decision on whether they want to stay in the EU or not, the market has taken this news positively as it will be a major step towards a breakthrough in the Brexit deadlock.’
BoE Warns No-Deal Brexit Will Cause High Levels of Market Volatility
The Pound was left under pressure as the Bank of England (BoE) warned that in the case of a no-deal Brexit there would be a ‘material risk’ of economic disruption, a plunge in asset prices, weakening financial conditions and high levels of market volatility.
In the Bank’s last scheduled meeting before the 31 October deadline, the Financial Policy Committee said it was preparing for the fallout of a chaotic no-deal Brexit.
In the minutes, the committee stated:
‘Financial stability is not the same as market stability. Significantly further asset price volatility is to be expected in a disorderly Brexit.’
The BoE also issued the caveat that while planning for a no-deal scenario has helped in limiting damage to the UK economy, a worst-case scenario would still see the country’s GDP drop by 5.5%.
Canadian Dollar (CAD) Left Flat as Oil Prices Slide
The Canadian Dollar (CAD) was left muted on Wednesday as oil prices fell for the third consecutive day and increasing US-China tensions caused uncertainty over oil demand.
Relations have deteriorated in the last few days, with US imposed visa restrictions on Chinese officials and the blacklisting of 28 Chinese companies in response to allegations of abuse against Muslim minorities causing friction between the two superpowers.
At the same time, data revealing a larger-than-expected increase in stockpiles held by the world’s top oil producer is weighing on prices.
Top US and Chinese officials are scheduled to begin talks on Thursday in an attempt to cool tensions and reach an agreement, but analysts remain doubtful a resolution can be achieved.
Senior market analyst for Asia Pacific at brokerage OANDA, Jeffrey Halley wrote:
‘Political turmoil amongst OPEC members will provide only a temporary panacea for oil prices; the event risk of U.S.-China trade is much larger.’
Pound Canadian Dollar Outlook: Will Disappointing UK GDP Weigh on GBP?
Looking ahead to Thursday, the Pound could fall against the Canadian Dollar if August’s GDP growth data contracts more than expected.
If UK industrial production for August contracts for the third consecutive month, GBP/CAD is also likely to slide.