The Pound Canadian Dollar (GBP/CAD) exchange rate has dipped this afternoon after the latest Bank of Canada (BoC) interest rate decision caused CAD to push higher.
At the time of writing the GBP/CAD exchange rate is trading at around CA$1.7446 as coronavirus concerns sneak back into the UK, limiting Sterling’s gains.
Pound (GBP) Supported by UK Inflation Data
Following the release of the UK’s latest inflation data for March the Pound has been supported for much of the day, as the consumer price index moved up to 0.7%, slightly missing forecasts of 0.8%.
The rise in inflation was support by an increase in fuel and clothing prices, though a fall in the price of food limited the rise last month.
As reported by the Office for National Statistics (ONS):
‘The rise this year has been influenced by a fall in the amount of discounting between February and March, albeit the incidence of discounting is still above normal levels for the time of year. The upward contribution came principally from a wide range of women’s clothing.’
Chief UK Economist at Capital Economics, Paul Dales has suggest that inflation will continue to rise as the UK’s economy reopens:
‘The rebound in CPI inflation from 0.4% in February to 0.7% in March is the start of a rise that we think will take inflation to around 1.5% in the next few months and above 2.0% by December.’
‘But as we doubt inflation will stick above 2.0% until late in 2023, the Bank of England is unlikely to hike interest rates for a few years yet.’
The Pound has however seen itself limited today following concerns over the Indian mutation of the coronavirus, with 103 cases of the variant reported in the UK so far, and India added to the ‘red-list’ of countries when travelling.
Canadian Dollar (CAD) Strenghtens on BoC Interest Rate Decision
The Canadian Dollar has found support from Canada’s latest inflation data release this afternoon, along with the most recent monetary policy report from the BoC.
As expected the BoC kept interest rates at a record-low of 0.25% to help combat the effects on the coronavirus pandemic.
The monetary reported released alongside the interest rate announcement took a more hawkish tone as the bank acknowledged the uncertainty of economic recovery from coronavirus.
Key messages from the report included thoughts on the recent surge in coronavirus cases in Canada, along with many people remaining out of work due to pandemic:
‘With the greater resilience of the Canadian and global economies, progress on vaccinations, continued fiscal and monetary policy support, and higher commodity prices, the overall Canadian outlook has been revised up from the January Report.’
‘In view of the more favourable economic outlook, the Bank now expects slack will be absorbed and inflation will sustainably return to target sometime in the second half of 2022.’
Pound Canadian Dollar Exchange Rate Outlook: UK Retail Sales in Focus
For Pound investors, Friday will see the release of the latest retail sales figures from the UK.
Retail sales figures are forecast to have risen to 4% year-on-year, up from the previous -3.4% as the UK economy begins to recover.
Also releasing on Friday are the latest consumer confidence index from the UK alongside preliminary PMI figures which are forecast to show a sustained growth.
For Canadian Dollar traders, the global market mood will continue to dictate movement in the currency heading into the weekend.
If global coronavirus cases continue to surge the ‘Loonie’ could dip.