The Pound Canadian Dollar exchange rate could become increasingly negative in the near-term if Britain and the EU can’t secure a transition deal before Christmas, according to Chief Executive of the Prudential Regulation Authority (PRA) Sam Woods.
GBP Falls on BoE Woods Comments
Sam Woods, one of the Bank of England’s (BoE) senior staff members, cautioned on Wednesday evening that, lacking a solid Brexit transition deal by Christmas, various banks and financial firms might leave the UK.
‘I struggle to see an outcome in which banks and insurers do not get harder to supervise and harder to resolve for all involved,’ Woods warned.
‘If we get to Christmas and the negotiations have not reached any agreement on this topic, diminishing marginal returns will kick in. Firms would start discounting the likelihood of a transition in the central case of their planning’.
These concerns originate from the understanding that banks need to make final staff moving decisions by the first quarter of 2018, but also that they require a year, if not more, to effectively set up functioning branches within Europe to prevent EU activities from being interrupted.
Wood’s asserted that, lacking the clarity afforded by a legally binding transition deal, some job loss may result from the disorderly shift of persons from the UK to the European Union.
This news fostered even more investor anxiety regarding a potential ‘cliff-edge’ Brexit, especially in light of recent comments from EU Chief Negotiator Michel Barnier, who claimed that ‘not enough progress had been made’ to warrant moving on to discuss trade talks.
The Pound Canadian Dollar exchange rate tumbled as a result of this outlook.
Amber Rudd Claims Brexit Breakthrough to Occur Very Soon – GBP Disinterested
UK Home Secretary Amber Rudd offered a contrasting perspective, however, arguing that the UK will hit the necessary milestone ‘very soon’.
Rudd stated:
‘I have seen the final elements of the negotiations between the UK and EU. I know that the outstanding elements, that are such as family reunion are very small. The key elements are already agreed, so I am confident we are going to have that agreement very soon’.
When asked how soon this might mean, Rudd stated that she hoped it would occur ‘before the end of the year’.
This claim did not prevent Sterling’s fall, however, with traders awaiting something slightly more tangible on the Brexit negotiation front before making significant investments in the Pound.
If Rudd is indeed correct and enough progress is made to move onto the next phase of negotiations before Christmas, the Pound could see a drastic jump in value – particularly if the BoE continues to push for a rate hike before the end of 2017.
Today’s BoE Speakers and What we Can Expect for the GBP CAD Exchange Rate
The Canadian Dollar is currently climbing today on news that OPEC is considering another production cut deal, whether this CAD upturn will continue, however, could be highly dependent on the content of today’s run of BoE member speeches.
With Sam Woods having completed his speech, next in the running is Ian McCafferty, followed by Victoria Cleland, Andrew Hauser and finally Chris Salmon.
Ian McCafferty’s speech could prove very notable, as he is one of the 9 members of the Monetary Policy Committee (MPC). As such, markets will be carefully assessing his speech for any indication that a rate hike might be taking place before Christmas, which, if provided, will likely reverse the Pound’s fall.
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