The Pound Canadian Dollar (GBP CAD) exchange rate rallied from a two-week low this morning, following resilient inflation figures from the UK.
While Sterling still remains subdued, sentiment was notably improved today as the UK’s inflation rate held at a three year high of 2.3% in March.
According to the CPI report published by the ONS, the robust reading was largely thanks to rising food and drink prices, with an uptick in clothing and footwear also helping inflation to hold.
The ONS also suggested that had airline fares not fallen dramatically from last year, thanks to the later start to the Easter holidays then the inflation rate may have pushed even higher.
However there are some concerns that the accelerated pace of inflation could negatively impact the UK’s economy over the coming months as its pressures household finances.
Laith Khalaf, senior analyst at Hargreaves Lansdown said;
‘Inflation may be steady, but it’s still currently outpacing wages and interest rates, which spells trouble for households and cash savers. The inflationary squeeze that’s coming is going to mean consumers have to spend more at the check-outs and petrol pumps, and that reduces their capacity to fund discretionary spending.’
Meanwhile the Canadian Dollar was forced to cede some ground today as crude prices began to ease from a five-week high struck late on Monday, over speculation that U.S. shale oil production will offset the supply shortages in the Middle East.
Brent crude futures slid by 0.36% to $55.78 per barrel by the start of trading this morning having fallen from a high of $56.16, leading to the ‘Loonie’ to trend lower.
Looking ahead to tomorrow the GBP AUD exchange rate may weaken despite the UK’s Unemployment Rate being expected to hold at a twelve-year low of 4.7% as investors will likely remain concerned about the weak wage growth.
The Pound may also be impacted by a speech by Bank of England (BoE) Governor, Mark Carney tomorrow morning, with investors likely to flock to the Pound if he hints that the bank may pursue a tighter monetary policy following the robust inflation reading.
Meanwhile the Bank of Canada is expected to hold interest rates at 0.5% in its latest policy meeting on Wednesday, with the Canadian Dollar likely to weaken if the bank indicates that rates are likely to remain unchanged for the foreseeable future.
Current Interbank Exchange Rates
At the time of writing the GBP CAD exchange rate was trending around 1.65 and the CAD GBP exchange rate was trending around 0.60.
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