The pound to Canadian dollar exchange rate is trading at the highest levels since June of last year creating a good opportunity for those looking to buy Canadian dollars. There has been a good move higher for GBP to CAD rates on optimism that a deal will be reached between Britain and the EU over Brexit. UK Attorney Geoffrey Cox was in Brussels yesterday with Brexit Secretary Stephen Barclay meeting the EU’s chief negotiator Michel Barnier.
The markets have been poised for a breakthrough over the contentious Irish backstop but it was announced yesterday afternoon that not enough progress has been made. A meaningful vote on the current deal will be held next week on Tuesday 12th March so the question is whether there is enough time to come to an agreement or some sort of compromise over the Irish backstop. With the withdrawal date of 29th March now fast approaching the GBP to CAD rate should be set for a very volatile few weeks and something is likely to give depending on which outcome materialises.
Canadian dollar weakness
The Canadian dollar has weakened in recent weeks on concerns over economic growth which has shown a downturn.
The Bank of Canada will meet today to discuss interest rates although it is widely expected to keep interest rates on hold at 1.75%. The Bank of Canada has raised interest rates by 125 basis points since the summer of 2017, although with global growth concerns this cycle of rate tightening may be coming to an end. Canada has followed the US Fed’s rate tightening quite closely and the perceived pause coming from the Fed may now be echoed in Canada.
Brexit outcome still far from certain
The Bank of England meanwhile has signalled its readiness for a no deal Brexit stating the bank is as “ready as they can be” for this outcome. The rhetoric should act as a reminder that the outcome of Brexit is still far from clear and a no deal Brexit is still a possibility. A no deal Brexit would likely see GBP to CAD rates fall sharply in the short term.
These next few weeks will be absolutely critical in determining the future direction of GBP to CAD and those with pending currency requirements should plan around the next event starting 12th March.
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