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Pound Canadian Dollar Exchange Rate’s Brexit Relief Rally Falters as Oil Prices Jump

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Pound Canadian Dollar Exchange Rate Struggles to Hold Advances 

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has seen mixed movement in recent weeks. While the Pound (GBP) has been benefitting from relief that a no-deal Brexit has been averted, the Canadian Dollar (CAD) has been appealing on overall market sentiment. 

After opening last week around the level of 1.7250, GBP/CAD rebounded and spent most of the week trending higher. 

While GBP/CAD did dip lower, the pair ultimately closed the week in the region of 1.7413. 

Since markets opened this week though, GBP/CAD has been trending lower again. At the time of writing on Monday morning, GBP/CAD is trending near the level of 1.7347. 

It comes largely as the Canadian Dollar benefits from commodity price news. However, uncertainties in Britain’s outlook are keeping a lid on its relief rally attempts. 

Pound (GBP) Exchange Rates Slide as Brexit Relief Rally Limited 

The UK and EU passed a new post-Brexit trade deal into law last week. As a result, the Pound saw a broad relief rally for much of the week. 

It meant that after years of uncertainty, the UK and EU had avoided a worst-case scenario cliff-edge Brexit. It was a big relief for markets and led to some solid Pound gains. 

However, the Pound was unable to keep capitalising on this relief. Other uncertainty persists in Britain’s outlook and is weighing on the British currency today. 

Even though Britain’s manufacturing PMI was better than projected last month, some analysts suggest that Britain’s lasting coronavirus issues and upcoming limited trade could hit activity more in early 2021. 

Canadian Dollar (CAD) Exchange Rates Bolstered by Oil Hopes 

The Canadian Dollar is a currency often correlated to market risk sentiment, particularly commodity sentiment. 

Trade is key to Canada’s economy. The Canadian Dollar is especially commonly influenced by movement in Canada’s biggest export, oil. 

As a result, global market hopes for an economic rebound from the coronavirus pandemic have made the Canadian Dollar outlook more appealing lately. 

Hopes for a better oil outlook going forward continue to support the Canadian Dollar today. Speculation that OPEC+ could announce more oil production cuts to stimulate market demand are boosting the Canadian currency. 

According to Warren Patterson, Commodities Strategist at ING: 

‘Price action today suggests that the market is assuming that Opec+ keeps the level of cuts unchanged for the upcoming month,’ 

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook Not Particularly Bullish 

Despite relief that a UK-EU post-Brexit deal has been implemented, there is still a lot of uncertainty in Britain’s outlook. 

Britain getting used to life outside the EU is likely to have complications and growing pains. Border issues between the UK and Spain are believed to be just the beginning for new potential issues down the line. 

What’s more, Britain’s coronavirus situation remains gloomy. If the UK enters a third national lockdown as is widely speculated, this could mean fresh losses for the Pound as well. 

The Canadian Dollar could remain appealing if coronavirus recovery hopes continue to boost commodity sentiment and oil prices. 

The Canadian Dollar’s outlook could be boosted even higher if upcoming Canadian data shows the nation as resilient to the pandemic. Key Canadian trade balance data and job market results will be published towards the end of the week. 

As for UK data, Wednesday’s UK services PMI results could influence the Pound to Canadian Dollar exchange rate if it surprises investors.