GBP/CAD exchange rates have fallen by two cents this week, with the pair now trading below 1.71. At one point it seemed as though the Pound was going to make a run at 1.75, only for the Brexit strangle-hold to once again tighten, causing investors to shy away from GBP.
As the Brexit deadline of March 29th fast approaches, the markets are becoming more cautious. Investors are having to plan for the potential outcome of a no-deal, even if they believe this scenario is unlikely to be the final outcome.
These thoughts were echoed by Bank of England (BoE) Mark Carney during a speech yesterday, where he highlighted a no-deal Brexit as one of the biggest risks to the UK economy, urging both sides to come to an agreement. It does seem as though a deal will be struck, whether this will be prior to the deadline of March 29th, or during any extension that may be granted by the EU.
If a deal does finally come to fruition, then investors are likely to look more favourably on the UK economy and its prospects, which in turn could help to boost Sterling’s value moving forward.
Whether any spike in confidence is sustainable will likely then depend on how the details of the deal are perceived after they’ve been analysed by the markets more closely.
Looking at current GBP/CAD exchange rates and the Pound continues to find support above 1.70, which has become a key threshold for the pair.
With the Canadian economy also struggling at present, due to falling oil prices and a slowdown in global demand, the CAD has also found life tough going of late. The export of crude oil is one of key facets for their export driven economy, so any slowdown in global demand will ultimately have a detrimental effect on the CAD.
With the markets likely to be heavily influenced by any prospective Brexit deal, along with any upturn in the global markets, I expect increased volatility on GBP/CAD rates over the coming weeks.
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