Pound to Canadian Dollar Exchange Rate Investors Anticipate Bank of England News
Despite a lack of market appetite for the Canadian Dollar this week, the Pound to Canadian Dollar (GBP/CAD) exchange rate has tumbled. The GBP/CAD outlook could see even weaker performance towards the end of the week.
Since opening at the level of 1.7544 on Monday, the GBP/CAD exchange rate has gradually declined. The pair briefly hit a weekly low of 1.7364 on Tuesday and while it has recovered from those lows it still trends near the level of 1.74.
The GBP/CAD outlook is likely to be influenced by Thursday’s anticipated Bank of England (BoE) policy decision, as well as Friday’s Canadian job market report.
If the Bank of England (BoE) decision disappoints investors, the Pound could continue to fall even if the Canadian Dollar (CAD) remains weak in the coming sessions.
Pound (GBP) Exchange Rates Pressured Ahead of Bank of England (BoE) Decision
Amid underwhelming January PMIs for the UK, as well as fresh attention to the divisions within the UK Conservative Party, investors have found the Pound largely unappealing.
Monday saw the publication of Britain’s services PMI, which fell short of expectations at just 53.0. The figure was expected to rise from 54.2 to 54.3.
The underwhelming UK services stats rounded off a trio of disappointing PMIs. As Britain’s services sector makes up a notable portion of its Gross Domestic Product (GDP), the data also dampened hopes that Britain’s economy was remaining resilient during the Brexit process.
With UK economic uncertainties higher again, investor hopes that the Bank of England (BoE) could take a more hawkish tone in the coming months have been dampened too.
Canadian Dollar (CAD) Supported Despite Weaker Oil Prices
While prices of oil, Canada’s most lucrative commodity, slipped on Wednesday, the oil-correlated Canadian Dollar was able to hold most of its weekly gains against the Pound.
This was due to weakness in the Pound, as well as calmer market conditions following a risk-off movement at the beginning of the week.
Risky currencies like the Canadian Dollar were unappealing during a fall in global stock markets on Monday, but as the selloff was short-lived and markets have since steadied slightly risky investments have become more appealing again.
The Canadian Dollar has also been supported by Canada’s December building permits results, which came in on Wednesday with a solid 4.8%.
Pound to Canadian Dollar (GBP/CAD) Outlook Forecast to be influenced by Bank of England Decision
The tone the Bank of England (BoE) takes in its February monetary policy decision on Thursday could influence the long-term outlook for the Pound to Canadian Dollar exchange rate.
For example, if the bank hints that it will be refocusing on tackling Britain’s high rate of inflation, this will lead to higher BoE interest rate hike bets and a higher Pound outlook.
On the other hand, if the BoE indicates that Britain’s economy has not been as resilient as hoped, the Pound could continue its current decline against the Canadian Dollar.
As for the Canadian Dollar itself, Friday’s Canadian job market results from January are likely to be highly influential.
The unemployment rate is expected to have worsened from 5.7% to 5.8% with the employment change figure expected to come in at 10k.
If Canadian inflation beats expectations, the Canadian Dollar is likely to see stronger demand towards the end of the week.