GBP/CAD Exchange Rate Rangebound after Emergency BoE Rate Decision
The Pound Canadian Dollar (GBP/CAD) exchange rate held steady this morning, with the pairing currently trading around CA$1.774.
The Bank of England (BoE) announced an emergency rate cut from 0.75% to 0.25% amid rising fears over the coronavirus’s effect on the British economy.
Kallum Pickering, Senior Economist at Berenberg Bank, commented on the interest rate cut and the upcoming Spring Budget announcement this afternoon:
‘That the BoE chose to announce its stimulus on the same day as the budget is telling. Policymakers are clearly concerned about the risks ahead. The joint action reflects the intention to send a big message that policymakers are prepared to take aggressive and pre-emptive steps to support the economy.’
Sterling traders are bracing for Chancellor Rishi Sunak’s announcement of the Budget for the next five years. Any signs that this could boost the British economy amid rising fears over Covid-19 would benefit the GBP/CAD exchange rate today.
After today’s release of January’s UK growth report, which showed that the economy had stagnated at 0% at the beginning of 2020, Sterling traders are cautious as the economic outlook remains uncertain.
Rob Kent-Smith, the Head of GDP at the Office for National Statistics (ONS), commented:
‘The economy continued to show no growth overall in the latest three months. Growth in construction, driven by housebuilding, offset yet another decline in manufacturing, particularly the drinks, cars and machinery industries.’
‘The dominant services sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment and education.’
Canadian Dollar (CAD) Struggles on Collapsing Oil Prices
The Canadian Dollar (CAD) steadied against many of its peers today after the rally in oil has failed to boost market confidence in the risk-sensitive ‘Loonie’.
Jordan Rochester, an analyst at Nomura, commented:
‘We think lower oil prices could persist, resulting in an enduring negative effect on Canada’s economy and capital flows. The pernicious combination of a notable fall in global demand via the COVID-19 outbreak and collapse in oil prices presents a key risk to oil-exporting nations such as Canada’
With Canada being the world’s fourth-largest producer and exporter of oil, shrinking oil prices are leaving CAD investors feeling pessimistic about the Canadian economy going forward into the year.
As a result, Canadian Dollar traders are now expecting an additional rate cut from the Bank of Canada (BoC) as the global coronavirus outbreak continues to weigh both on the global economy and oil prices.
GBP/CAD Outlook: Could the ‘Loonie’ Sink on an Oil Price Slump?
Canadian Dollar (CAD) will remain sensitive to oil prices over the course of this week. Any further signs of Covid-19 hitting the global economy and weakening prices of Canada’s largest import and export would provide CAD-negative.
The GBP/CAD exchange rate could edge higher this week if the Spring Budget provides hope for the British economy.