GBP to CAD forecast: Brexit continues to be the key factor

GBP to CAD forecast: Brexit continues to be the key factor

Brexit: What Next?

The lack of clarity surrounding Brexit continues to impact the GBP to CAD forecast, holding back Sterling against the Canadian Dollar. The current situation does not bode well for Sterling. Theresa May has postponed the Parliamentary vote on her deal due to rumours circulating there is a significant short fall of MPs willing to back the deal.

May’s intention is to renegotiate the current deal with Brussels, however President of the European Commission, Jean-Claude Junker has stated there will be no further concessions simply a willingness to clarify the current terms. If this is the case and May is being stone walled it looks as though the Brexit deal will not go through. The UK Government returns to Parliament on the 7th of January and the vote is now due to take place on the week commencing 14th January.

Ex-Brexit Secretary, David Davis has urged May to delay the vote again to provide more time to prepare for a no deal scenario which will put the UK in a better position to obtain better terms on a Brexit deal.

What happens if the Brexit deal is not passed by Parliament?

There is the chance if the vote goes ahead and May’s deal does not get passed that she may face a leadership challenge from Corbyn, or indeed she could resign. If this is the case I would expect initial Sterling weakness, but if this brings a second EU referendum back to the table we could see the Pound strengthen. Polls suggest a second referendum would now go in favour of remaining in the EU, which would improve investor confidence and Sterling value as a result.

A no deal scenario would be the most detrimental to the pound although I do not believe the fear mongering from the Bank of England who are suggesting UK house prices could fall by 25%.

The Canadian Economy in 2019

The Canadian economy entered into 2018 on an impressive run, but oil prices in 2019 are a concern considering it is Canada’s largest export. 2018 growth data is likely to come in close to an impressive 2% and unemployment was close to a 40 year low for much of the year. The prediction for 2019 is for a further 2% growth although I feel this is optimistic. The concerns regarding oil are real and this could hinder Canadian economic growth and in turn hit the Canadian Dollar.

The uncertainty surrounding Brexit is currently outweighing any negative news from Canada and I think will continue to do so until there is some kind of firm progress in talks.

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