Pound to Canadian Dollar (GBP/CAD) Exchange Rate Rebounds on Buoyant Brexit Hopes

Pound to Canadian Dollar Exchange Rate Avoids Losses despite Higher Risk-Sentiment 

Despite the persisting threat of a no-deal Brexit, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is rebounding today. Hopes for the US to reach some kind of stimulus deal are keeping the Canadian Dollar (CAD) from falling too much. 

The Canadian Dollar has been resilient over the past week or so. GBP/CAD slipped lower from the interbank region of 1.71 to 1.70 last week. The pair also touched on a low of 1.69 – the worst level for the pair since September. 

This week’s GBP/CAD movement has been more mixed in comparison. GBP/CAD tumbled yesterday, but at the time of writing the pair is trending above this week’s opening levels again. 

Comments from EU officials are keeping markets optimistic about UK-EU Brexit negotiations. This is supporting the Pound (GBP), even as Britain’s coronavirus situation worsens. 

Pound (GBP) Exchange Rates Avoiding Losses as Brexit Hopes Persist 

Hopes that the UK and EU will still reach some kind of Brexit deal have been helping the Pound (GBP) to avoid losses in recent weeks. This is continuing despite the UK stance that it has essentially walked away from talks. 

Today, the Pound is advancing in reaction to fresh comments from EU Brexit Negotiator Michel Barnier. Barnier reportedly said that a Brexit deal was ‘within reach’, which gave investors reason to keep buying Sterling. 

According to Kenneth Broux, Head of Corporate Research at Societe Generale: 

‘The market doesn’t sit there thinking ‘there isn’t going to be a deal, we should be trading at (US)$1.25’. The market wants to rally. Any positive soundbites that do come out are being jumped on as a reason to buy,’ 

The Pound outlook was little-affected by today’s UK ecostats. UK inflation met forecasts and public borrowing figures worsened over last month as expected. 

Canadian Dollar (CAD) Exchange Rates Resilient on Market Sentiment 

The Canadian Dollar (CAD) has been relatively resilient over the past week. Lingering hopes that US Congress could still agree to a fiscal stimulus deal before next month’s US Presidential Election have made investors more willing to take risks. 

As the Canadian Dollar is relatively correlated to risk and trade sentiment, this as well as strong Chinese data bolstered CAD appeal. 

According to Scott Smith, Managing Partner at Viewpoint Investment Partners: 

‘The Canadian Dollar has been associated as a risk currency, 

So when we see equity markets doing well, the Canadian Dollar receives a bump as a result of that.’ 

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Awaits Brexit News and Canadian Data 

Movement on GBP/CAD could continue to be jittery, amid uncertainty over the direction of UK-EU Brexit negotiations. However, Brexit developments still have the biggest potential to cause GBP/CAD movement overall. 

If a Brexit deal gets closer despite the UK government’s tough stance, the Pound (GBP) is likely to rise and GBP/CAD will strengthen higher. Collapsing talks would have the opposite effect though. 

As for the Canadian Dollar (CAD), it could be influenced by key Canadian data due later today. In particular, Canadian retail sales data could have a notable impact on Canada’s economic outlook if it surprises. 

Canada’s upcoming inflation rate data is unlikely to be highly influential though. According to Analysts at ING: 

‘One of the factors at play has been the low expectations for further Bank of Canada easing, and today’s inflation data for September in Canada is unlikely to make a difference in these terms.’ 

Developments in domestic coronavirus news and global market sentiment will continue to drive the Pound to Canadian Dollar (GBP/CAD) exchange rate as well. 

Josh Jeffery

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