Throughout yesterday afternoon the Canadian dollar received a well needed boost off the back of reduced trade war tensions. The Wall street stock market rallied following reports that the US and China are prepared to sit down and discuss trade and potentially renegotiate certain tariffs which benefit both parties.
Central banks tend to hold of raising interest rates at times of uncertainty and the Bank of Canada confirmed this a few weeks ago. However, now that it looks like there will be formal negotiations, the chances the Bank of Canada will raise interest rates in the upcoming months has improved and that is why the Loonie had a positive day yesterday.
In regards to GBPCAD it’s no surprise that the pound has made gains against the Canadian dollar. The UK are through the transitional period and trade talks should start early next month. It’s clear to see that the UK and EU are negotiating and want to negotiate. However a key concern is the Irish border which is being discussed at present.
The UK do not want the Irish border to turn into a ‘hard border’ but at the same time the PM has made it clear Northern Ireland will not remain part of the customs union and therefore break away from the UK. These discussions are going to be tough and at present I don’t see any alternative other than a hard border or Northern Ireland remaining part of the customs union. Either way this story I expect will put pressure on the pound in the upcoming months.
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