Crucial Vote on Post-Brexit Trade could Trigger GBP/CAD Exchange Rate Turbulence
The Pound to Canadian Dollar (GBP/CAD) exchange rate has been tight on 27th February, ahead of a key vote that could decide the future path of Brexit talks.
The issue at hand is what kind of trade agreement the UK has with the EU after it parts with the multinational union.
The official Conservative Party line is that the UK should leave the EU customs union, but opposition parties and Conservative rebels disagree with this outlook.
To that end, Conservatives opposed to pulling out of the customs union have tabled an amendment which would force the UK to remain in an EU trade agreement.
This amendment has the provisional support of the Labour Party along with the Scottish National Party (SNP) and the rebels who proposed the change to start with.
If these factions put aside their differences and approve the amendment against pro-Brexit Conservatives, the Pound could rally against the Canadian Dollar.
There have been strong arguments against leaving the customs union, so approval of the amendment could reassure GBP traders and raise confidence in the UK currency.
Emphasising this point of view, former Trade minister Sir Martin Donnelly has warned that;
‘You’re giving up a three-course meal, the depth and intensity of our trade relationship across the European Union and partners now, for the promise of a packet of crisps in the future.
If we manage to do trade deals in the future outside the EU, [these] aren’t going to compensate for what we’re giving up’.
Canadian Dollar to Pound Volatility Risk from CA Budget 2018
The Canadian Dollar (CAD) could see a notable shift in value against the Pound in the near-term, when the Canadian Finance Ministry announces its 2018 budget plans.
Ahead of its release, the general consensus has been that this will be a long-term plan rather than one full of short measures.
With that in mind, the Canadian Dollar could fall in value if CAD traders are disappointed by a lack of planned action when it comes to competitiveness.
The US has recently cut corporation tax to increase investment – the concern is that Canada could fall behind if the Canadian government doesn’t respond economically.
Higher CA GDP Reading could Trigger CAD/GBP Rate Rise
Looking further ahead, the Canadian Dollar to Pound exchange rate (CAD/GBP) could be influenced by GDP growth rate data out on 2nd March.
Expectations are for a slowing month-on-month reading, but growth for the annualised Q4 figure.
The annual reading is considered the more important of the two, so the Canadian Dollar could firm on such a result and rise against the Pound.
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