- GBP/CAD clambers back from brink as Brexit fears ebb.

- Optimism over deal prospects resuscitates GBP's rates.

- GBP/CAD supported at 1.68, faces resistance near 1.72.

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GBP/CAD spot rate at time of writing: 1.7097Bank transfer rate (indicative guide): 1.6499-1.6618FX specialist providers (indicative guide): 1.6841-1.6977More information on FX specialist rates here The Pound-to-Canadian Dollar exchange rate has risen from a proverbial grave this week and was looking to extend its recovery rally on Tuesday as fears of a 'no deal' Brexit were buried amid renewed optimism about the chance of a deal being reached, although Sterling faces nearby resistance on the charts.

Pound Sterling was the best performing major currency for second consecutive session Tuesday, closing the book on last week's bout of underperformance, which saw it hammered into an early grave by Prime Minister Boris Johnson's claims suggesting a 'no deal' Brexit was growing likely.

Irish Prime Minister Michael Martin was the latest on Tuesday to express reinvigorated hopes that an agreement on trade and the future releationship could be reached as soon as Wednesday or Thursday.

"Recent tones out of the EU have highlighted the potential for a breakthrough," says Joshua Mahony, a senior analyst at IG. "The recent sterling strength seen this week does highlight optimism that common sense will prevail to avoid shifting the UK recovery back into reverse."

Leader of Britain's House of Commons Jacob Rees-Mogg said there will be an announcement this Thursday on whether parliament sits next week leading up to Christmas, which it certainly would if trade terms are agreed.

Nothing confirmed yet and MPs saying: many a slip between cup and lip. But MPs being told the signal will come if and when Jacob Rees-Mogg announces that the commons will sit on Monday and Tuesday next week. That would come before any UK / EU announcement

— Nicholas Watt (@nicholaswatt) December 15, 2020Britain and the EU have only until December 31 before the standstill transition period ends and either a new agreement is implemented or they default to trading according to World Trade Organization (WTO) terms, an outcome that some analysts say would see the Pound fall to 1.25 against the U.S. Dollar.

For its part, the Canadian Dollar was also an outperformer with declines against only Sterling, the Yen and Swedish Krona in the major currency sphere.

"GBP looks to be consolidating around the 200- week MA (1.7058) towards the middle of last week’s range. Trend strength signals are leaning bearish but are not especially strong across the daily and weekly studies at this point. We look for more range trading," says Juan Manuel Herrera at Scotiabank. "We spot resistance near 1.72 (200-day MA). Strong support is 1.6750/00."

Above: Pound-Canadian rate shown daily 55-day and 200-day moving-average alongside USD/CAD (black line, left axis).

"The sharp acceleration higher does lean towards the idea of a base forming in the cross after the sharp fall on Thursday last week," Scotiabank's Herrera says in a Monday research note. "USDCAD’s sustained downtrend is showing signs of moderating, at least temporarily. Price action formed a “doji” candle on the weekly chart last week—often a sign that a directional move has stalled—and intraday movement today shows the USD trying to rally through short-term downtrend resistance at 1.2765/70."

A 'no deal' outcome and GBP/USD fall to 1.25 would be a bearish development that sends the Pound-to-Canadian Dollar rate as low as 1.59 in the event that USD/CAD remains around Tuesday's 1.2729 level. Simulatenous gains in USD/CAD would lessen the downside in GBP/CAD and vice versa.

The Pound-to-Canadian Dollar rate has risen more than 2% this week from Friday's close around 1.68, aided by Prime Minister Boris Johnson, who said on Sunday that trade negotiations would continue. This was despite having threatened to walk away on Friday, and a purported lack of progress at the time.

"The market awaits further news regarding Brexit, and GBP will be driven by headline volatility over the coming days. The EU suggested there was a degree of progress regarding discussions surrounding the level playing field. However, the UK has disagreed, stating ‘talks remain difficult.’ While the UK may be talking up the difficulties of gaining a deal in order to defended political interests, the possibility of a no deal cannot be ruled out," warns Jeremy Stretch, head of FX strategy at CIBC Capital Markets.

Since last week London's political press has been awash with suggestions that compromises and progress are being made, while Ireland's foreign minister Simon Coveney was was out even before his Prime Minister saying on Tuesday that Dublin is "seeing progress" and that it remains hopeful an agreement can be concluded promptly.

Boris Johnson had riled markets as well as Pound Sterling exchange rates on Thursday and Friday last week when saying that a 'no deal' exit was looking to him like the most probable outcome, although even then there were signs that a pact rather than a pullout was the most likely outcome.

"Levels here look attractive for those who assume a deal will be done," says Joe Tuckey, an analyst at Argentex, referring to the GBP/EUR rate. "We must remain sensitive to what the price action is telling us, and that is one of cautious optimism."

Above: Pound-Canadian rate shown at weekly intervals alongside GBP/USD (black line, left axis).