Sterling has spiked up against the Canadian Dollar recently, but remains highly vulnerable to any further shocks from the ongoing Brexit process.
Customs Clarity Needed to Secure Long-Term GBP CAD Gains
Returning to one of the greatest influencers of the Pound in recent weeks, the Brexit process is still something that could trigger sharp GBP gains or losses in the near-term.
The exact progress of talks remains unclear, with sporadic updates from UK and EU officials frequently bringing confusion instead of clarity.
Recent news that has lowered opinions of the talks has included a forecast of long delays and over £1bn a year in economic damage when it comes to customs arrangements.
This report, produced by European consultancy company Oxera, has predicted the effects of enhanced border controls added after Brexit.
In the words of Oxera analysts, if there were ‘low regulation [and] high enforcement’ after Brexit;
‘We estimate the impact of such a scenario to be at least £1bn per year. This is an extremely conservative estimate – it does not account for the economic costs of the uncertainty involved, the extra staff needed (for hauliers, ports and customs officials), the congestion associated with calling Operation Stack, the land required for the additional customs checks [in the form of lorry parks], or of the wider economic impacts of jobs moving overseas due to uncertainty over the operation of just-in-time logistics. The full cost is likely to be much higher’.
While just one symptom of a potential Brexit-inspired shutdown, signs that this might become a reality are only likely to worsen the Pound to Canadian Dollar exchange rate.
Canadian Dollar Drop Possible on Lower BOC Rate Hike Odds
The Bank of Canada (BOC) rose interest rates for the first time in seven years in July. Since then, traders have been eagerly predicted when the next such hike could take place.
In that vein, any signs that the BOC’s decision may have been premature could trigger a knee-jerk negative trader reaction.
Such a case may be incoming on August 4th, when Canadian jobs data for July comes out. If the unemployment rate rises then the CAD could weaken; the same is true for a smaller-than-expected increase in employed persons.
Recent Interbank GBP CAD Exchange Rates
At the time of writing, the Pound to Canadian Dollar (GBP CAD) exchange rate was trading at 1.6465 and the Canadian Dollar to Pound (CAD GBP) exchange rate was trading at 0.6068.
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