GBP/CAD Exchange Rate Steadied despite Rising Canadian Inflation
The Pound Canadian Dollar (GBP/CAD) exchange rate held steady to CA$1.615 today, despite yesterday’s Canadian inflation figure for July, which increased by 0.5% despite a consensus of below 0.1%.
Royce Mendes, an Economist at CIBC Capital Markets, commented:
‘Consumer prices blasted ahead in July, easily sailing past even our above-consensus expectation. That said, there could be some weakness in prices in the months to come as the airline and travel tours categories reverse these gains, and gasoline costs fall.’
However, odds have increased that the Bank of Canada (BoC) will follow in the footsteps of the US Federal Reserve by lowering interest rates amid intensifying US-China trade conflicts.
Canadian Dollar (CAD) traders will be looking to the Jackson Hole Symposium today for any signals that the US Fed Chairman Jerome Powell could ease monetary policy in the near-term.
Junichi Ishikawa, an Economist Strategist at IG Securities, Tokyo, commented:
‘Yields are supportive of the dollar for now, but this may not last after Powell’s speech. Additional rate cuts are thoroughly priced in. If Powell sounds slightly hawkish, stocks could sell off, which would hurt the dollar against safe-haven currencies like the [Japanese Yen].’
As the ‘Loonie’ is closely tied to the US Dollar, any signs of dovishness from the Fed could see the CAD/GBP exchange rate sink further.
GBP/CAD Exchange Rate Rangebound as Irish Backstop is Expected to Rejected by France
The Pound (GBP) improved despite Prime Minister Boris Johnson’s scheduled meeting with French President Emmanuel Macron, in which the French leader is expected to state that removing the Irish backstop from the withdrawal agreement is ‘not an option’.
This follows comments from German Chancellor Angela Merkel who set a 30-day time limit to find an achievable alternative to the Irish backstop.
Mr Johnson responded that it was a ‘blistering timetable’ and that he was ‘more than happy with that’. He added:
‘I think that if we approach this with sufficient patience and optimism we can get this done and it is in the final furlong generally when the horses change places and the winning deal appears.’
However, as France is expected to reject any alternatives, we could see Sterling begin to lose some ground against the Canadian currency.
GBP/CAD Outlook: Could the Canadian Dollar on Surprise Hawkishness from the Fed?
Canadian Dollar investors will be looking ahead to Friday’s publication of the Canadian retail sales figure for Jun, which is expected to hold steady at -0.1%.
Meanwhile, Sterling traders will be awaiting the publication of the UK BBA mortgage approvals figure for July.
The GBP/CAD exchange rate could ease, however, if the Federal Reserve shows any surprising hawkishness during the course of the Jackson Hole Symposium.