Pound Canadian Dollar (GBP/CAD) Exchange Rate Fluctuates on Brexit Headwinds

The Pound Canadian Dollar (GBP/CAD) exchange rate fell last week as the UK threatened to invoke article 16 of the Brexit agreement over trade in Northern Ireland.

Sterling then rebounded as oil prices dropped, weighing upon the Canadian Dollar (CAD) and subsequently boosting GBP/CAD. Brexit tensions eased as the EU declared it was willing to negotiate.

Into this week, the exchange rate fell as an international migrant crisis escalated EU tensions, but had subsequently risen on positive UK employment data.

What’s Been Happening: Brexit Tensions, Oil Prices Determine Movement

The Pound (GBP) fell through Tuesday and Wednesday last week, as UK threats to trigger article 16 of the Brexit agreement caused tension with the EU.

UK politicians argued that serious economic, societal or environmental difficulties had already arisen in the course of discussions, justifying drastic action.

Midweek, Ireland’s deputy Prime Minister Leo Varadkar admitted that Ireland had already begun to make contingency plans in case of a trade war.

The Pound Canadian Dollar exchange rate then rebounded on Thursday, on better-than-expected monthly UK GDP: WTI oil prices fell, prompting CAD downside.

The exchange rate fluctuated at the end of the week despite easing Brexit tensions and further ‘Loonie’ losses on fears of increased oil supply. GBP investors restrained bullish urges on account of subdued economic growth.

Into this week, GBP/CAD dipped before rebounding this morning, as an upbeat data release from the UK revealed a greater-than-expected fall in unemployment.

Three Things to Watch Out for This Week

  1. Inflation

Both the UK and Canada will print inflation data for the month of October tomorrow. High inflation may hurry tightening measures from the central banks of England and Canada.

  1. Canadian Employment

Following today’s UK employment data, Canada will release October’s ADP employment change figures on Thursday. If 40K new jobs were added in October as expected, CAD will likely enjoy tailwinds.

  1. Retail Sales

Canadian sales are expected to have declined in September, potentially exerting headwinds; forecasts predict UK sales grew in October.

Pound Canadian Dollar Forecast

The Pound Canadian Dollar exchange rate is likely to fluctuate through this week’s session, on mixed data and external factors.

High inflation may persuade central bank officials to tighten monetary policy; however, external pressures from Brexit or WTI oil prices could exert bearish downside.

Olivia Evershed

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