UK-EU Trade Talks Uncertainty Fails to Drag on Pound Canadian Dollar (GBP/CAD) Exchange Rate
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate found renewed support ahead of the weekend even as the uncertainty plaguing UK-EU trade talks persisted.
Although the key issues between the two sides remained unresolved, with less than a week now left until the deadline for a draft deal, Pound Sterling (GBP) pushed higher across the board.
As the impact of Thursday’s underwhelming UK gross domestic product report faded this allowed GBP exchange rates to recover some of their lost traction.
Even so, the strength of the Pound looked distinctly limited in the absence of any particularly supportive domestic developments.
However, with the general sense of market risk appetite diminished as earlier relief over the prospect of a Covid-19 vaccine waned the Canadian Dollar (CAD) came under pressure.
Weakening Oil Market Momentum Limits Canadian Dollar Support
After staging strong gains in response to the US presidential election result oil prices were unable to maintain their momentum during trade on Friday.
This weakness dragged on the commodity-correlated Canadian Dollar, with investors still wary of the potential for oil supply to continue outstripping demand in the months ahead.
As the price of Brent crude dropped -1.4% on the day’s opening level this left CAD exchange rates on the back foot.
Support for the Canadian Dollar may pick back up on Monday, however, if September’s manufacturing sales data strengthens as forecast.
A solid rebound in manufacturing sales would help to limit anxiety over the health of the Canadian economy, suggesting a stronger end to the third quarter.
Evidence of greater resilience within the manufacturing sector could see the GBP/CAD exchange rate shedding ground once again as confidence in the Canadian outlook improves.
Even so, if market sentiment remains muted in the days ahead this may limit the potential for any Canadian Dollar rally as anxiety over the global economy lingers.
Impending Brexit Deal Deadline Set to Weigh on GBP Exchange Rates
As the deadline for the draft Brexit deal approaches this could keep the GBP/CAD exchange rate on the back foot.
Fears over the possibility of the two sides failing to reach an agreement, resulting in a no-deal scenario, look set to weigh on the Pound until any positive announcement emerges.
As long as key issues show no signs of coming towards a resolution ahead of Thursday’s meeting of EU leaders the mood towards the Pound could prove muted.
However, Wednesday’s UK consumer price index report may still offer GBP exchange rates a temporary rallying point.
If the headline inflation rate can pick up from 0.5% to 0.6% on the year as anticipated this may help to ease anxiety over the Bank of England’s (BoE) policy outlook.
Any evidence that inflationary pressure built in October would leave policymakers with less incentive to consider cutting interest rates into negative territory, limiting the downside potential of the Pound.
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