Despite its positive move against the EUR yesterday, GBP has failed to make any further inroads against the CAD this week.
The Loonie found plenty of support around the interbank rate of 1.75, which remains a key threshold for the pair. It subsequent move back towards 1.74 overnight indicates, that once again the pound could find plenty of resistance around the current levels.
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In truth, GBP has failed to make any serious impact beyond the current trade price, with Brexit concerns helping to protect the CAD from any major devaluation beyond this point.
As we enter the key stages of Brexit talks, investors will be asking themselves whether or not sterling may finally be able to break free from its shackles.
Much will depend on whether a deal is agreed with the EU, a scenario which will help facilitate any prospective upturn. Any improvement for the pound will be inextricably linked to progress with Brexit, but if we finally see some forward momentum in this regard, then the current dovish outlook for the Canadian economy could well help sterling.
Whilst the Canadian economy is still expected to grow in 2019, it is likely to do so at a slower pace than in recent years. The current 2% growth forecast is well under the 3% growth seen in 2017, with a fall to 2.1% in 2018 potentially a more concerning sign of things to come.
It is not all doom and gloom for those clients holding CAD however, with Canadian unemployment remaining close to a four decade low, whilst a slight upturn in oil prices will also benefit Canada’s export driven economy.
On the flip side, concerns over global growth and a slowdown in trade is hurting all the commodity-based currencies and whilst the CAD seems to be performing better than some, any aggressive move back towards the interbank rate of 1.70 against GBP could be unlikely, unless of course the UK fail to agree a deal with the EU ahead of our impending Brexit.
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