GBP/CAD: Pound Tumbles as Johnson Insists on His Brexit Deadline

GBP/CAD is in free fall on Tuesday, as UK Prime Minister Boris Johnson wants to introduce a new change in the Withdrawal Agreement Bill (WAB) to rule out any extension of Brexit transition deadline, which is currently set for December 31, 2020.

Currently, one British pound buys 1.7387, down 0.80% as of 10:15 AM UTC. Thus, the pair has lost all election gains during the last few days, trading exactly at previous Tuesday levels.

Johnson’s Conservative Party won the UK election and could form a majority government. In light of this, the PM will likely manage to take the country of the European bloc by January 31 of next year. However, the transition process might require up to two years. The current deadline, set for the end of 2020, can be delayed by mutual agreement, but Johnson wants to make any potential extension illegal. Thus, he opens the door for a no-deal Brexit, which might have disastrous effects for the British economy.

IG Markets analyst Kyle Rodda commented:

The honeymoon of the election is now over and the risks of a potential hard Brexit have been brought forward. Johnson is taking an assertive stance on Brexit and although a hard divorce may still be in the margins for now, there are increasing risk premiums priced into the pound.”

On top of that, the pound is under additional pressure after the Office for National Statistics (ONS) and the Confederation of British Industry (CBI) released several economic updates.

Thus, the UK’s factory sector has seen its worst quarter since the financial crisis in 2008. The CBI’s industrial trend orders fell in the three months to December to -28, from -26 in November, while analysts expected an improvement. The worst sub-sector was motor vehicles.

Elsewhere, the ONS’ labor data showed some signs of tensions in October. Job vacancies declined below 800,000 for the first time since 2017 and salaries increased at their slowest annual pace since last year. Nevertheless, the ONS said that the slowdown in wages is caused by high bonus payments in October last year, which distorted the comparison. Employment rose more than expected, leaving the unemployment rate unchanged at 3.8% – the lowest level in four decades.


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