GBP/CAD: Loonie Advances on US-China Trade Optimism

GBP/CAD is declining on Monday even though it showed some signs of bullishness in the morning. Currently, the pair is trading at 1.7059, down 0.11% as of 10:11 AM UTC. Thus, the quotation has just updated the lowest level of the month at 1.7052, after seeing the worst week in years.

While the pound is under pressure after the UK Parliament passed the Withdrawal Agreement Bill (WAB) that rules out any extension of the Brexit transition deadline, the Loonie is backed by increasing optimism over the US-China trade deal. Last Friday, US President Donald Trump said that he had spoken with Chinese counterpart Xi Jinping. The leaders of the world’s two biggest economies reached some consensus on issues that have divided them, including Hong Kong and North Korea.

More than a week ago, Beijing and Washington sealed a phase on the trade deal, which is about to be signed early next year. Trump tweeted on Friday:

“Had a very good talk with President Xi of China concerning our giant Trade Deal. China has already started large scale purchase of agricultural product & more. Formal signing being arranged. Also talked about North Korea, where we are working with China, & Hong Kong (progress!)”

Nevertheless, Xi was not so happy about all the circumstances. China’s Xinhua news agency revealed that Xi told Trump that Beijing was worried about “the negative words and deeds” of the US on issues related to Hong Kong, Taiwan, Xinjiang, and Tibet.

“These actions have interfered in China’s internal affairs, harmed China’s interests and undermined mutual trust and cooperation between the two sides,” the Chinese president said.

Despite everything, China agreed to sign the trade deal. The country will cut tariffs on products imported from the US, including frozen pork and semiconductors, starting from January next year. The finance ministry said earlier today that China would lower tariffs on over 850 products.

While the Canadian dollar is driven by positive trade news, given that Canada is an export-reliant economy, the currency is still under pressure amid disappointing economic indicators. On Friday, Statistics Canada said that retail sales tumbled unexpectedly in October, possibly forcing the Bank of Canada to consider a rate cut next year.

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