A sharp fall in oil prices failed to keep the GBP/CAD exchange rate from slumping today as market anxiety over Brexit spiked once again.
Last Week: Pound Slumps as UK Shows Signs of Backtracking on Parts of Withdrawal Agreement
The GBP/CAD exchange rate slid after reports that Boris Johnson could renege on previous agreements relating to the Irish border issue prompted the Pound to slide against its rivals at the start of this week.
The increased threat of Brexit talks collapsing without a final deal agreed left GBP exchange rates biased to the downside as fears over the future of the UK economy mounted.
Even so, support for the Canadian Dollar proved limited in the wake of news that Saudi Arabia had cut its oil prices, pushing the global oil market lower.
With investors in an increasingly risk-averse mindset, the Canadian Dollar struggled to make gains as confidence in initial signs of a global bounce-back from Covid-19 disruption faded.
Three Things to Watch Out for This Week
- Bank of Canada Interest Rate Decision
While no change in monetary policy is expected from the Bank of Canada’s (BOC) September policy meeting, this could still provoke Canadian Dollar volatility.
Any fresh signs of dovishness from BOC policymakers may fuel bets that additional policy action could still be on the horizon, leaving CAD exchange rates on a weaker footing.
- UK GDP
The UK’s growth data released at the end of the week is forecast to show another contraction in its three-month average reading.
However, the month-on-month July expectation of 6.7% growth could support GBP exchange rates as it could suggest the UK economy is starting to show signs of healthy recovery.
- UK-EU Brexit Talks
Mounting tensions between UK and EU officials are likely to dominate the outlook for the Pound this week, however.
As long as key issues such as the Irish border and fishing rights continue to sour relations, the growing risk of a no-deal scenario could drag the Pound lower still across the board.
Brexit fears and evidence of weak UK economic momentum look set to limit the potential for a GBP/CAD exchange rate rally in the days ahead.