Latest Brexit Developments Prompt Severe Pound Canadian Dollar (GBP/CAD) Exchange Rate Volatility
The Pound to Canadian Dollar (GBP/CAD) exchange rate saw some volatile movement amid the latest developments surrounding Brexit.
News that the EU had initiated legal action against the UK for its breach of the withdrawal agreement initially sent Pound Sterling (GBP) into a sharp slump against its rivals.
However, this weakness ultimately proved short-lived thanks to subsequent reports suggesting that the UK and EU are approaching a deal in their final round of Brexit trade talks.
While it remains to be seen whether this latest sense of optimism will translate into a deal this still gave the GBP/CAD exchange rate a solid boost, reversing its earlier losses.
Nevertheless, the potential for further GBP exchange rate volatility remains until the issue of Brexit is fully settled on way or another.
Canadian Dollar Looks for Support on Strengthening Manufacturing Sector
Support for the Canadian Dollar (CAD) could strengthen this afternoon, meanwhile, if September’s Canadian manufacturing PMI picks up as forecast.
Investors expect to see the index improve from 55.1 to 55.3 on the month, signalling another solid bout of growth momentum for the sector.
This would likely encourage greater confidence in the general economic outlook, giving CAD exchange rates a fresh rallying point.
However, the mood towards the commodity-correlated currency could easily sour if oil markets remain under pressure in the days ahead.
Brent crude saw a decline of more than 1% on the day’s opening, spurred by fears of rising global production even as demand fails to bounce back from its Covid-19 crisis lows.
While markets adopted a more risk-positive mentality in response to hopes of progress towards a fresh US fiscal stimulus package any renewed jitters could weigh heavily on CAD exchange rates.
Underwhelming Finalised UK Services PMI Forecast to Weigh on Pound
A negative revision to September’s finalised UK manufacturing PMI cast fresh doubt over the resilience of the UK economy.
With manufacturers continuing to lay off workers in spite of the presence of the government furlough scheme fears of a fresh wave of job losses picked back up.
If the corresponding services PMI paints a similar picture this could drive the Pound to lose fresh ground against its rivals on Monday.
As the service sector is still responsible for more than two thirds of the UK gross domestic product any signs of weakness here could weigh heavily on the GBP/CAD exchange rate.
Unless the sector can demonstrate resilience in the face of renewed economic anxiety this may limit the Pound’s ability to push higher across the board.
The latest developments surrounding Brexit may also weigh on the GBP/CAD exchange rate over the coming days, especially if the UK and EU ultimately fail to reach an agreement.