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Pound Canadian Dollar Retreats from Four-Month High, Were Reports of a Draft Brexit Deal Premature?

GBP/CAD Exchange Rate Slides as Brexit Optimism Fades

The Pound Canadian Dollar (GBP/CAD) exchange rate is on the defensive this morning amid conflicting reports on progress in Brexit talks.

At the time of writing the GBP/CAD exchange rate is trading at around CA$1.6810, down roughly 0.3% from this morning’s opening levels.

Pound (GBP) Stumbles, Will the DUP Derail a Brexit Deal?

The Pound (GBP) is facing headwinds this morning, walking back some of yesterday’s gains amid scepticism that a last-minute Brexit deal could be reached today.

Sterling roared higher on Tuesday, after Bloomberg reported the UK and EU were close to reaching a draft deal.

However it appears that this may have been a little over optimistic, as the Democratic Unionist Party (DUP) remains unconvinced by the current proposals.

The DUP is said to be opposed to concessions made by Boris Johnson to Brussels, which would create in a customs border in the Irish Sea.

While they only hold 10 seats in the Commons, their support for the deal is thought to be vital if it is to have a chance of passing through parliament.

Former Brexit Secretary David Davis told BBC Radio 4:

‘You said 10 votes, by the way earlier. Just as an aside on that, there will be quite a lot of Tory MPs who will take their line from what the DUP do. If the DUP say this is intolerable, that will be quite important.’

With an extremely narrow timeframe left for the UK and EU to finalise a deal before this week’s EU summit GBP investors do not appear to be holding out much hope.

Canadian Dollar (CAD) to Rise as Inflation Accelerates

Meanwhile the Canadian Dollar (CAD) is enjoying some modest gains this morning ahead of Canada’s latest CPI release.

Economists forecast today’s data will show that inflation accelerated from 1.9% to 2.1% in September.

This will put inflation back within the Bank of Canada’s (BoC) target range, giving the bank more scope to buck the prevailing trend by leaving interest rates on hold.

As a result we may see the ‘Loonie’ continue to tick higher through the second half of today’s session.