The breaking news over the weekend is that Brexit secretary David Davis has announced his resignation after the meeting at Chequers. He left after the meeting as he believed he was no longer the best person to lead the UK’s Brexit plan as it was not something he believed in.
According to Davis under the proposed deal the UK is giving away too much to the EU and this was one of the main reasons for his resignation.
Typically this news would have been taken negatively by the Pound but in this case as it appears that the UK is opting towards a softer Brexit this has given the Pound a welcome boost vs the Canadian Dollar this morning.
The value of GBPCAD exchange rates have been trading in a very strange pattern recently and this is more evidence of this happening.
The Canadian unemployment rate hit 6% late last week and with the Bank of Canada due to release interest rates on Wednesday we could see a very volatile period coming up for the Canadian Dollar.
Interest rates south of the border in the US have been increased 7 times since December 2015 and already twice this year so there is an expectation that the Bank of Canada will need to look at raising rates before being left too far behind.
However, I would be surprised to see an interest rate hike coming this week after last week’s negative data and the ongoing uncertainty caused by the breakdown in talks concerning the NAFTA deal.
As the US has increased tariffs globally, and considering doing more in the near future I think the NAFTA talks have been moved down the pecking order and this has caused the Canadian Dollar to remain under pressure.
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