The pound to Canadian dollar exchange rate has fallen sharply lower with rates for the GBP to CAD pair now sitting below 1.66.
Much of the pound’s weakness is coming from Brexit uncertainty as the Conservative leadership battle continues between hopefuls Boris Johnson and Jeremy Hunt.
With a no deal Brexit looking like a distinct and credible possibility the pound has dropped lower against most of the major currencies, including the Canadian dollar. Boris Johnson remains the clear favourite by some way and his stance is very different from Jeremy Hunt’s when it comes to Brexit.
Increased chance of no deal Brexit is weakening the pound
Boris has made clear that Britain will categorically leave the EU by 31st October with or without a deal. This is apposed to the foreign secretary Jeremy Hunt would be prepared to extend if necessary and seeks a deal with the EU. The increased probability of a no deal Brexit taking place is leaving the pound on a weaker footing and this has been reflected in the price of GBP vs CAD over the last 6 weeks.
Canadian dollar volatility due to US China trade war
The Canadian dollar meanwhile is likely to see continued volatility over developments surrounding the ongoing US China trade war. Leaders Donald Trump and Xi Jinping will meet today for the G20 summit in Osaka which will be the first time leaders have met since the trade talks broke down in May.
US Treasury Secretary Steven Mnuchin this week said that the trade deal is getting closer and in his mind was 95% of the way there. The markets are awaiting developments on the terms of a trade deal and this is likely to have a major impact on Canadian dollar exchange rates.
The Canadian dollar, as a commodity currency is impacted heavily by trade developments like this. When the global economy is perceived as performing well then this usually helps the commodity currencies including the Canadian dollar.
A truce between the US and China is expected this weekend and the agreement could see plans for an increase in tariffs on an additional $300 billion of Chinese exports heading for the US cancelled. How positive these talks go this weekend will likely play a big role for GBP/CAD exchange rates.
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