GBP/CAD Jumps 0.50% as EU Ministers Approve Trade Talks Mandate

GBP/CAD accelerates the rally that started on February 20. Currently, the pair is trading at 1.7262, up 0.50% as of 9:18 AM UTC.

While CAD is affected by declining oil prices amid the coronavirus epidemic, the pound started to surge on hopes that Britain would reach some consensus with European leaders on an eventual trade deal, even though tensions still persist.

EU governments should adopt a mandate today for the task of negotiation with the UK the future relationship format. At the end of last month, Britain finally left the bloc, and now it should reach a trade agreement that would define its status with respect to the EU.

Investors reacted positively on the news that the EU mandate aims to offer the UK no tariffs and no quotas in the future, but it would happen only if the latter doesn’t undercut EU firms with lower standards.

While Britain aims for a zero-tariff trade relationship, it doesn’t want to accept any set of rules or standards imposed by the EU. Instead, the UK wants a Canada-style deal.

France’s Europe Minister Amelie de Montchalin told the media:

“We can have an agreement with zero tariffs and zero quotas if we can be sure we will have common norms… regulatory proximity on the basis of EU rules. If we cannot maintain this regulatory proximity, then we must apply tariffs or quotas. It’s not a position of revenge, it’s an economically rational position.”

The UK is expected to release its own negotiating position on Thursday. The talks between the two sides will start next week, and Britain must end up with a deal by the end of this year if it wants to avoid a hard Brexit.

For German Europe Minister Michael Roth, as well as for many other European leaders, “this is an extremely ambitious timetable.”

While the meeting of European leaders is keeping sterling buoyant, the tensions are likely to intensify when the trade talks start, so the bullish trend might not be that sustainable.

Currently, the pound is also leveraging the Loonie’s weakness amid the spread of the coronavirus, which affects global trade.

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