Repeated Mentions of No-Deal Brexit Drag GBP/CAD Exchange Rate Down Today
The Pound (GBP) has fallen by -0.5% against the Canadian Dollar (CAD) today, trading at a level of CA$ 1.6633 on the interbank exchange rate.
This poor performance has been caused by ongoing and intensifying trader fears about a no-deal Brexit damaging the UK economy, despite government efforts to reassure businesses and citizens that the country can prosper regardless of its eventual Brexit deal.
Before heading off to Africa to tout UK post-Brexit investment plans, Prime Minister Theresa May downplayed the risks of a no-deal Brexit by saying:
‘Look at what the director general of the World Trade Organisation has said. He has said about the no-deal situation that it will not be a walk in the park, but it wouldn’t be the end of the world.
‘What the government is doing is putting in place the preparation such that if we are in that situation, we can make a success of it, just as we can make a success of a good deal.’
Despite the sentiment, there has still been damage to GBP demand today because of Mrs May’s assertion that a no-deal Brexit is still preferred over a bad deal:
‘I’ve said right from the beginning that no deal is better than a bad deal.
‘I think it’s absolutely right that the Government is putting the preparations in place for no deal, because we don’t know what the outcome of this is going to be.
‘But alongside that what we’re doing is working for a good deal.
‘I believe what we’ve set out in the Chequers arrangement, set out in the white paper, is a deal that benefits not just the United Kingdom but benefits the European Union as well.’
While it hasn’t helped out the GBP/CAD exchange rate, International Trade Secretary Liam Fox has also attempted to reassure Pound Sterling traders by saying:
‘Some of us remember the supposed economic shock we were going to get if Britain voted to leave the European Union and the result of the referendum itself was going to cost us half a million jobs, it was going to see investors desert the UK and our economy plunge into recession.
‘What has in fact happened: We’ve added 600,000 jobs to the economy, we saw a record number of inward investment projects land in the UK last year and our economy has continued to grow.
‘That was over a two-year time horizon, so projections over a 15-year time horizon are rather hard to swallow.’
Canadian Dollar to Pound Exchange Rate (CAD/GBP) Rises on NAFTA Hopes
The Canadian Dollar (CAD) has firmed and risen against the Pound (GBP) today, thanks to signs that there could be a near-term resolution to North American Free Trade Agreement (NAFTA) talks.
The US has been renegotiating the terms of NAFTA since 2017; the deal involves the US, Canada and Mexico and a Mexican agreement on the new terms has reportedly been secured.
While this doesn’t guarantee an immediate Canadian agreement to the renegotiated NAFTA deal, the implication that three-way approval could be imminent has boosted CAD demand today.
Future Pound to Canadian Dollar (GBP/CAD) Forecast: Will CA GDP Growth Extend Sterling Losses?
The Pound (GBP) is at risk of making additional losses against the Canadian Dollar (CAD) in the future, when Canadian Q2 GDP growth data comes out on Thursday.
The pace of Canadian economic growth is forecast to have accelerated during the second quarter of 2018, with a shift from 0.3% to 0.6% on the quarter and an annual rise from 1.3% to 3%.
Both results would be good news for future Canadian economic growth and could lead to a sharp Canadian Dollar to Pound (CAD/GBP) exchange rate rise.
Beyond this data, the Pound could make additional losses on Friday morning if GfK’s latest consumer confidence reading prints poorly.
This measurement of consumer sentiment levels in August is predicted to reprint at -10 points or worsen to -12 points; both results could drain GBP trader confidence.
Any negative reading indicates a majority of pessimistic respondents, so unless the measurement makes a surprise shift towards the positive range then the Pound could remain in low demand.
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TAGS: Pound Canadian Dollar Forecasts