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Revived Brexit Fear Dominates Currency Markets and Sends GBP/CAD Plummeting

Last week’s high: C$1.7174

Last week’s low: C$1.6892

Canadian Dollar Steadies as Core Inflation Unexpectedly Rises

After a fairly volatile week, the Pound to Canadian Dollar exchange rate plunged on Friday as fears of a worst-case scenario ‘no-deal Brexit’ were revived.

UK Prime Minister Theresa May held a speech on Friday in which she defended her so-called Chequers Brexit plan and indicated she would not soften her position on issues like the government’s intention to leave the single market and maintain a soft border with Ireland.

Her speech followed criticism of the UK government’s plan from EU leaders. As neither side of negotiations appeared willing to soften stances on the issue of Ireland’s border, investors became concerned that UK-EU negotiations could collapse if no agreement is made within the next month or so.

Sterling was sold off at the end of the week in reaction to these ‘no-deal Brexit’ fears, but the Canadian Dollar held its ground following the publication of Canada’s latest data.

While Canadian retail sales fell short of forecasts in July, August’s inflation rate only slowed slightly as expected. On top of this, the core inflation rate unexpectedly rose year-on-year in August, from 1.6% to 1.7% rather than the expected 1.4%.

CAD Outlook: UK and Canadian Growth Figures Ahead, Brexit Developments in Focus

As Brexit fears have heightened once more, the Pound to Canadian Dollar exchange rate is unlikely to recover much of its recent losses unless there are notable signs of progress in UK-EU negotiations.

While negotiators are confident that around 90% of a Brexit deal had been agreed, the issue of Ireland’s border has persisted since negotiations began over a year ago. Unless progress is made soon on the issue of Ireland’s border, the Pound could remain under pressure for much of the week.

Of course, that also means that if any notable progress is reached in talks, the Pound to Canadian Dollar exchange rate could surge and regain much of its recent losses.

Upcoming UK and Canada data could also prove influential this week, especially with UK and Canadian Gross Domestic Product (GDP) growth data due for publication on Friday.

Other notable stats due throughout the week include CBI’s industrial trends orders on Monday and UK consumer confidence stats from GfK on Friday.

 

Key Events

24th September

11:00 UK CBI Industrial Trends Orders

13:30 Canadian Wholesale Sales

26th September

09:30 UK Finance Mortgage Approvals

11:00 UK CBI Distributive Trades

28th September

12:01 UK GfK Consumer Confidence

09:30 UK Growth Rate

09:30 UK Business Investment

09:30 UK Current Account

13:30 Canadian Growth Rate

 

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To keep up to date with the Canadian Dollar, visit the CAD blog in our Currency News section.

 

Alastair Archbold

Currency Trader

T: 01442 892 066

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