In times of global economic uncertainty Sterling usually does not fair well due to our imports far outweighing our exports. On top of the Coronavirus situation we also have Brexit to contend with. There is a complete lack of clarity surrounding trade and it seems unlikely we will have a solution by the end of the year.
Boris Johnson has stated on many an occasion he intends to get a deal done by the end of 2020. One of the biggest concerns for investors is the possibility of a no deal scenario. If an extension to trade talks was announced this could well ease investor concerns and cause a Spike for Sterling.
What Effects CAD
Despite Sterling still being in a fragile position we are seeing some quite significant gains against the Canadian Dollar rising almost 5 cents to 1.75 in the last week of trading. I would be wary of thinking this is down to Sterling strength it is most likely the case it is due to Canadian Dollar weakness. The Canadian Dollar is considered a riskier, commodity based currency. Canada’s primary export is oil and the current price war is not doing the Canadian Dollar any favours. Oil price remains very low and depending on how long the price war continues will hold bearing on how long the Canadian Dollar will remain on the ropes.
These are unprecedented times and it is very difficult to draw on previous economic situations to predict what may happen next on GBP/CAD. If the Corona situation in the UK shows a rapid escalation expect Sterling to begin to suffer. There are rumours circulating at present that there could be a truce between Russia and Saudi Arabia in the oil war, if this does take place we could see Canadian Dollar strength.
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