Pound Canadian Dollar (GBP/CAD) Firms as UK-EU Talks Start
The Pound Canadian Dollar (GBP/CAD) exchange rate is edging slightly higher this morning after falling yesterday.
GBP/CAD has started the session trading at 1.6949, down on the week’s opening levels.
Optimism over the UK and EU making an agreement on the Northern Ireland protocol and expectation for the Bank of England (BoE) to raise interest rates are underpinning support for Sterling.
Pound (GBP) Strengthens on Northern Ireland Protocol Optimism
The Pound is ticking slightly higher against the Canadian Dollar so far today after dipping through Thursday’s session.
Following the EU’s proposals on easing border checks on goods arriving in Northern Ireland, optimism for a UK-EU agreement picked up ahead of a meeting between Brexit Minister Lord Frost and European Commission Vice-President Maros Šefčovič.
The EU’s plan would reduce spot checks by about 80% and customs paperwork by 50%.
Despite the upbeat mood surrounding the talks, the situation could sour as the UK has said more fundamental change is needed on the Northern Ireland protocol.
A spokesperson for the UK government said:
“It is clear there is still a substantial gap between our two positions. Accordingly, there is much work to do.
“Both we and the EU now have proposals on the table.
“We need to discuss them intensively in the days to come to see if the gaps can be bridged and a solution found which delivers the significant change needed.”
Meanwhile, Šefčovič has said the EU would “respect deals we have signed which became international law” and that he has “no mandate to renegotiate protocol”.
GBP exchange rates also continue receiving support from expectations that the BoE will hike interest rates before Christmas despite comments from a policymaker.
Monetary Policy Committee (MPC) member Silvana Tenreyro warned yesterday that raising interest rates to tackle a temporary rise in inflation would be ‘self-defeating’.
Canadian Dollar (CAD) Buoyed by Rising Oil Prices
The Canadian Dollar is strengthening again at the end of this week’s session as rising oil prices continue to underpin support for the commodity-linked ‘Loonie’.
WTI crude prices are holding above $81.31 a barrel after rising over 1% yesterday after Saudi Arabia dismissed calls for OPEC+ to increase supply and surging natural gas prices boost demand for oil.
The International Energy Agency (IEA) warned shortages of gas and coal could trigger soaring demand for oil, in turn driving prices higher.
The IEA said:
“Record coal and gas prices as well as rolling blackouts are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming,”
Meanwhile, Canadian manufacturing sales offered the Canadian Dollar modest support as factory sales data came in as expected in August at 0.5% growth, a rebound from July’s -1.2% contraction.
CAD exchange rates are also continuing to benefit from last week’s jobs data that showed Canadian unemployment fell to pre-pandemic levels, and speculation increases that the Bank of Canada (BoC) will raise interest rates soon.
Pound Canadian Dollar Forecast: Rising Oil Prices to Drive CAD Higher?
The Pound Canadian Dollar exchange rate could remain under pressure going into the start of next week as rising oil prices continue to strengthen CAD exchange rates.
At the same time, any positive or negative headlines surrounding the UK-EU talks on the Northern Ireland protocol will likely drive movement in GBP.
The Pound will also remain sensitive to any speculation on the BoE tightening monetary, and soaring gas prices that threaten UK industry shutdowns.