Hopes that a post-Brexit trade deal can be reached kept the GBP/CAD exchange rate on a positive footing today, with the pair are currently trading around $1.718.
The Pound is recovering from last week’s losses and climbing higher this week, with speculation that a post-Brexit deal could be close bolstering GBP sentiment.
European Commission President Ursula von der Leyen has taken an optimistic view on Brexit talks, saying today that a path to a deal now exists.
Speaking to MEP’s at European Parliament, she said:
‘As things stand I cannot tell you whether there will be a deal or not, but I can tell you that there is a path to an agreement now. The path may be very narrow, but it is there, and it is therefore our responsibility to continue trying.’
At the same time, weaker-than-expected UK inflation dropping to 0.3%, and the UK services PMI slipping into contraction both appeared to be overshadowed by Brexit optimism as the Pound made gains.
Canadian Dollar (CAD) Weakens Despite Strong Inflation Data Release
The Canadian Dollar fell this afternoon in spite of Canada’s annual inflation rate release. Inflation accelerated to 1.0% in November, up from a year-on-year increase of 0.7%.
The inflation data release is the highest since last February and above forecasts of 0.8 percent.
The average of the Bank of Canada’s three core measures was unchanged at 1.7%, holding below the central bank’s 2% target.
Instead, the Canadian Dollar fell after investors became spooked by comments from the Bank of Canada (BoC) Governor Tiff Macklem over the strength of CAD exchange rates.
As the Canadian Dollar is a trade-correlated currency, strong CAD exchange rates could hurt Canadian exporters , sparking concern among investors that the BoC could take action and mirror Federal Reserve inflation policy.
GBP/CAD Outlook: Brexit to Remain in the Spotlight
Speculation over a potential UK-EU trade deal will continue to remain in the spotlight for investors in the coming days.
If a post-Brexit trade deal is found before the deadline in just over two weeks it would prove GBP-positive.
Tomorrow will also see the Bank of England (BoE) hold its December policy decision, but a gloomy outlook on the UK economy could weigh on GBP exchange rates.
The Canadian Dollar could be in for more volatility tomorrow while investors assess the possibility of BoC action.
On the data front, the latest ADP employment figures could drive additional movement in CAD exchange rates if they see any improvement on the previous month
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