Pound to Canadian Dollar Exchange Rate Rebounds despite Brexit Uncertainties
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is holding above its worst levels today. Market risk-aversion is keeping pressure on the Canadian Dollar (CAD) and making it easier for Sterling (GBP) to recover, despite Brexit uncertainties.
Since opening at the level of 1.7092 this week, GBP/CAD has continued to trend with a downside bias. GBP/CAD quickly shed around a cent yesterday.
GBP/CAD even touched on a low of 1.6909 this morning. This was the pair’s worst level in a month, since mid-September.
At the time of writing, GBP/CAD was rebounding and had recovered most of this morning’s losses. GBP/CAD currently trends near the level of 1.7000.
Looking forward, concerns about the global coronavirus outlook have the potential to cause further weakness in the Canadian Dollar.
Pound (GBP) Exchange Rates Weak as Brexit Uncertainties Intensify
This week was set to be a key week for UK-EU Brexit negotiations. The UK government’s self-imposed deadline for talks is the 15th of October, and many analysts hoped for at least some noteworthy progress in talks before this time.
However, reports have emerged today suggesting that the EU does not expect sufficient progress to be made this week. The EU is expected to say as much at its upcoming late-week summit.
Hopes for a no-deal Brexit persist, and hopes for a good deal are fading. Many analysts now only expect a thin trade deal within the next month. According to Derek Halpenny, Head of Research at MUFG, this is keeping pressure on Sterling:
‘We are only arriving at the possibility of a deal due to its being very narrow in scope…There is set to be considerable disruption and frictions on trade that may well still be underestimated by the markets that will likely curtail the period of Pound appreciation following a likely deal over the coming weeks’
Canadian Dollar (CAD) Exchange Rates Weighed by Risk-Aversion and Oil Concerns
The Canadian Dollar is a currency often correlated with risk and especially trade sentiment. This is because Canada is a trade-heavy nation, and its economic performance regularly correlates with oil exports.
As a result, the Canadian Dollar has been less appealing this week. Concerns over surging global coronavirus cases are leading to fresh speculation that oil prices will remain weaker for longer.
According to a report from the International Energy Agency (IEA):
‘The trajectory for Covid-19 infections is strongly upwards in many countries and governments are tightening restrictions on the movements of their citizens. This surely raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth.’
Risk-aversion has also persisted due to US political uncertainties, which are only further weighing on the Canadian Dollar.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook Focused on Brexit Developments
With the coronavirus pandemic looking likely to remain a huge issue for global economies well into 2021, the Pound to Canadian Dollar exchange rate outlook may benefit from risk-aversion.
However, the GBP/CAD outlook could be hit even lower depending on how the Brexit process unfolds. There are still likely to be huge Brexit developments in the coming month.
Analysts currently expect some kind of Brexit deal will be agreed by the end of November, even if it is a small one.
Some major developments are possible this week, depending on what happens around the 15th of October negotiation deadline and the EU Summit towards the end of the week.
Brexit will be the main focus for the Pound outlook, but the Canadian Dollar outlook could be influenced by tomorrow’s Canadian employment change figures from ADP.
Of course, any global coronavirus developments that influence oil prices will also remain influential for the Pound to Canadian Dollar (GBP/CAD) exchange rate outlook.