Pausing of UK-EU Trade Talks Drags on Pound Canadian Dollar (GBP/CAD) Exchange Rate
As an EU negotiator’s positive Covid-19 diagnosis prompted a pause in UK-EU trade talks the Pound to Canadian Dollar (GBP/CAD) exchange rate returned to the back foot.
With the two sides looking increasingly unlikely to reach an agreement in the near future market anxiety over Brexit picked back up once again, to the detriment of Pound Sterling (GBP).
GBP exchange rates also weakened in response to November’s CBI industrial trends orders index, which slumped from -34 to -40 on the month.
This highlighted the increasingly bearish outlook among manufacturing businesses, demonstrating the challenges facing the UK economy in the fourth quarter.
With prolonged Brexit-based uncertainty looking set to fuel further uncertainty worries over the economic outlook rose, pushing the Pound lower against its rivals.
Canadian Dollar Support Limited as Job Losses Continue to Mount
Confidence in the outlook of the Canadian economy also took a dent, thanks to the ADP employment change report for October.
Although the latest figure showed a smaller increase in job losses than forecast this was balanced out by a significant downward revision to the previous month’s figure.
All in all, this pointed towards the increasing fragility of the Canadian labour market, giving investors limited reason to favour the Canadian Dollar (CAD) exchange rate over its rivals.
Even so, the relative weakness of the Pound was still enough to keep the GBP/CAD exchange rate on the back foot for the time being.
Lower UK Consumer Confidence Set to Weaken Pound Appeal
Further weakness may be in store for the Pound on Friday with the release of November’s GfK consumer confidence index.
Investors expect to see the index fall from -31 to -34 on the month, reflecting increasing domestic worries and the impact of the second national lockdown.
October’s retail sales data could also put a significant dampener on the GBP/CAD exchange rate, with forecasts pointing towards sale growth stalling completely on the month.
Higher levels of consumer spending have previously helped to shore up the UK economy in the face of slowdown pressure, with a weaker reading here appearing to increase the risk of a fourth quarter growth contraction.
Softer Canadian Retail Sales Forecast to Limit CAD Exchange Rate Support
However, the Canadian Dollar could also face selling pressure ahead of the weekend if Canadian retail sales show signs of weakness.
September’s figures look set to show a loss of momentum on the month, with sales growth weakening from 0.4% to 0.2%.
This would not encourage any particular sense of confidence in the outlook of the Canadian economy, increasing the pressure on CAD exchange rates.
Any further deterioration in market risk appetite may also help to limit the downside potential of the GBP/CAD exchange rate ahead of the weekend.