Pound Canadian Dollar (GBP/CAD) Exchange Rate Slumps on Hard Brexit Fears

December 18, 2019 – Written by John Cameron

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls on Increased Brexit Pessimism

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls on Increased Brexit Pessimism

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped on Wednesday morning, thanks to an increase in Brexit pessimism. The pairing was left trading at around CA$ 1.7205.

Sterling remained under pressure today, as markets feared the UK would suffer a hard Brexit at the end of 2020.

While the Pound was able to reach highs against handfuls of currencies thanks to Boris Johnson’s election win last week, the currency suffered losses thanks to Brexit pessimism.

The Prime Minister’s government campaigned to ‘get Brexit done’ and recently announced it has set the end of 2020 as an immovable deadline to reach a trade agreement with the European Union.

Meanwhile, officials in Brussels said the timetable for negotiations is ‘rigid’ which could limit the scope of any trade deal between the UK and EU.

Commenting on this, Chris Weston, head of research at brokerage, Pepperstone said:

‘With the level of frothiness in positioning, I think people had priced in very smooth sailing throughout 2020.

‘This has given us a snap back to reality. If you thought Brexit was solved, and we’re going to see very, very smooth times ahead, then that’s not quite going to be the case.’

Canadian Dollar (CAD) Increases despite Fall in Oil Prices

The Canadian Dollar rose on Wednesday despite a surprise buildup of US crude inventories weighed on oil prices.

However, progress between the US and China meant that losses were capped thanks to a likely increase in oil demand for 2020.

Commenting on this, market strategist at AxiTrader, Stephen Innes said:

‘The sizzling oil market rally came to a grinding halt after an unexpected climb in the weekly US crude inventory report.

‘Investors have transcended the trade deal-inspired relief rally euphoria, and are now banking on a fundamental demand-driven shift that could quicken the pace of the oil market rebalancing in the first quarter of 2020.’

Pound (GBP) Slides as UK Inflation Stuck at Three-Year Low

The Office for National Statistics (ONS) revealed UK inflation remained unchanged at a three-year low in November.

Annual inflation remained at 1.5%, below the Bank of England’s (BoE) target.

However, this means the bank is unlikely to cut rates any time soon.

In the last meeting, the BoE forecast inflation falling to 1.25% at the start of 2020, although expects this to be back above the 2% target in around three years.

Commenting on this morning’s data, PwC economist, Jing Teow said:

‘The below-target level of inflation means that the Bank of England will be under little pressure to raise its policy rates soon.

‘However, a recovery next year that follows a further easing of political and economic uncertainties could spur further economic activity and spending, giving rise to inflationary pressures in the medium term.’

Pound Canadian Dollar Outlook: Will a Dovish BoE Weigh on GBP?

Looking ahead to this afternoon, the Canadian Dollar (CAD) could rise against the Pound (GBP) following the release of November’s inflation rate.

If inflation rises higher than expected, the ‘Loonie’ could receive an upswing of support.

Meanwhile, Sterling is likely to remain under pressure ahead of the Bank of England’s monetary policy meeting.

While the bank is not expected to cut rates, if its outlook is overly dovish the Pound Canadian Dollar (GBP/CAD) exchange rate could slide.

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TAGS: Pound Canadian Dollar Forecasts