GBP/CAD Surges 0.5% on Fragile Hopes That Johnson Might Change His Mind

GBP/CAD is surging on Friday as anxiety over Brexit has eased after Christmas and Boxing Day. Currently, one British pound buys 1.7133 Canadian dollars, up 0.50% as of 11:05 AM UTC. The pound has managed to depart from December lows and break the resistance line of a dramatic bearish trend that slashed over 3%.

Sterling investors have been depressed by the ongoing Brexit uncertainty, as UK Prime Minister Boris Johnson, who recently won a historic victory in the national election, decided to make it illegal for the government to extend the Brexit transition period beyond December 2020. Analysts fear that the tight timeline might lead to a no-deal withdrawal.

While trading volumes are still low in the wake of the holidays, the pound has managed to recover a part of the recent losses, even if no UK data is released today. The rebound might also be explained by technical analysis reasons, with the pair trying to address investors’ overreaction on no-deal Brexit fears.

The British currency’s rally against the Canadian dollar defies fundamentals, as the Loonie should be supported by surging oil prices that hit three-month highs. Besides this, Brexit anxiety hasn’t gone away.

Earlier today, European Commission President Ursula von der Leyen said that Johnson should reconsider his refusal to move the deadline of the 11-month period available for trade talks. She told the French newspaper Les Echos:

“It’s not only about negotiating a free trade deal but many other subjects. It seems to me that on both sides we must ask ourselves seriously if all these negotiations are feasible in such a short time.”

The UK will officially leave the European bloc on January 31, though it will continue to stay in the EU’s customs union and the European market until the end of 2020. While the UK has the option to remain within those unions for two more years, Johnson wants to rush the transition process.

Von der Leyen said that making any extension attempt illegal was a bad move from Johnson, considering the risks for both sides. She added:

“I believe that it would be reasonable to review things in the middle of the year, if necessary to see if an extension is needed.”

It is likely that investors see in Von der Leyen’s words some hope that Johnson might change his mind.

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