GBPCAD continues with slight improvement but what could Brexit bring?

Canadian Dollar Suffers Seven-Week Low Following the Spread of the Coronavirus

Sterling has made a slow and steady improvement against the Canadian dollar over the last few months, and unless we have any major Brexit setbacks then it is fairly likely that this trend may continue.

The latest news on Brexit this morning is that Theresa May has delayed the key vote in Parliament this week and has set a deadline for it to happen by 12th March, giving her more time to negotiate.

There are rumours now that it looks as though there could be an extension to article 50 on the card;, this could mean that Brexit is significantly delayed or it also opens the door to it not even happening at all.

What it would most likely do on top of this is strengthen the pound, mainly because it decreases the chances of a ‘no deal’ Brexit and this had been what hanging over the head of the pound and holding it back from any significant improvement.

Over in Canada there are economic concerns, productivity has dropped and some analysts have also suggested that the Bank of Canada and Stephen Poloz may even have to consider cutting interest rates later in the year to make Candadian exports more attractive.

An interest rate cut usually decreases demand in a currency and can make it weaker as investors seek to move out of that currency and into one that offers a better return for thier money.

The level of household debt in Canada is also seen as a big issue, similar to many other larger economies in the world and this in time can lead to less consumer spending and a drop in growth figures.

Personally I feel that unless there are any big Brexit issues for the U.K, the sterling exchange rate could continue to rise against the Canadian dollar, but do be wary that setbacks, particuarly Brexit setbacks may lead to sharp and unexpected declines so it is a rate to watch very closely.

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