Sterling set to remain fragile against the Canadian Dollar as oil prices rise

Could Brexit developments and the Canadian Interest Rate Decision cause movement for GBPCAD later today?

Boris remains front runner in leadership contest

Pound to Canadian dollar exchange rates have dropped recently, with the pound suffering against the majority of major currencies of late. The UK currently has no Prime Minister and Brexit remains in limbo offering investors little confidence in GBP.

It is looking highly likely that Boris will come into power and has stated he will be using the no deal scenario as ammunition to negotiate a more favourable deal from Brussels. It would be expected the higher the probability of a no deal the weaker GBP rates become.

Will the new UK Prime Minister negotiate a new deal with Brussels?

Something everyone seems to be neglecting to acknowledge is Brussel’s refusal to negotiate. It has been stated on numerous occasions the deal on the table will not be changed, there will be no concessions made. Brussel’s has stuck to their guns so far and have warned Britain not to waste their time during this extension. It seems Britain is, as the leadership challenge consumes more valuable time.

It is not in Brussel’s interest to let the UK leave with a favourable deal. They are trying to avoid a domino effect, there are several EU members that could follow suit if the UK were to leave in a strong position. Italy for example, who are currently being threatened by the EU with a €3bn fine for excessive debt could be looking for a way out. If this started an exodus the Eurozone itself would be at threat. If Brussels do stick to their current stance, we could be looking at a no deal or a second referendum.

Oil price hike strengthens Canadian dollar

The Canadian dollar could potentially benefit from the tensions in the Middle East, with oil it’s prime export a fall in supply could cause a rise in oil price and in turn a rise in Canadian dollar value.

I am afraid that in the short to medium term I feel sterling will remain fragile and susceptible to further losses until we have some form of clarity on Brexit and we have a firm leader.

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