Will GBP/CAD Rates Fall Back Below 1.70?

Sterling has failed to solidify its recent gains against CAD, falling back towards 1.70 this morning.

The pound has lost two cents in the past few days, having gained over four in the previous week.

Whilst the pound is likely to find support around the 1.70 threshold, the key question now is whether or not this level is likely to be broken over the coming days.

The pound’s value continues to be driven by the market’s sentiment surrounding Brexit. Last week a deal with the EU looked imminent and the pound received an influx of support as a result, with investors looking at its levels against the CAD and probably feeling it was some what undervalued.

Fast forward a week and it seems as though talks between the UK & EU have once again hit an impasse. UK Prime Minister Theresa May has indicated that there may be an extension to the current deadline, in terms of a backstop agreement regarding the Irish border. This would allow talks to continue until a solution is found and she seemed to indicate that this could be a matter of months not weeks.

The markets have not reacted well to this development, as it is likely to add further uncertainty to the situation. Investors have been crying out for some stability and a tangible strategy regarding how the UK economy is going to move forward in its post-Brexit era. The current standoff is doing little to facilitate this.

Looking at the Canadian economy the CAD has struggled to make inroads against GBP, with a slowdown in global trade putting pressure on the commodity-based currencies, which include the CAD.

The recently revised NAFTA agreement, or USMCA as it has been renamed, has not had the impact some investors would have hoped for. This is probably due to the fact that the revised terms are less favourable than the previous agreement but the Canadian Government felt that without it, their economy would suffer in the longer-term.

Feel free to get in touch using the form below if you’d like to discuss any of the above, or to ask another question about the factors likely to impact your Canadian dollar transfer. I’ll be happy to respond personally.

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