Pound Canadian Dollar (GBP/CAD) Exchange Rates Jump on Hawkish BoE Vlieghe Remarks
The Pound Canadian Dollar (GBP/CAD) exchange rate made a small recovery on Tuesday, bolstered by some surprisingly hawkish remarks from Bank of England (BoE) Policymaker Gertjan Vlieghe.
Mr Vlieghe asserted that he expects slightly more interest rate increases over the next three years than the current market forecast of just under three 25 basis-point rises.
Indeed, he warned that interest rates could rise up to six times during this period.
Speaking to the Treasury Select Committee, he stated:
‘Provided the headwinds from Brexit uncertainty do not intensify in the near term, and ultimately fade over the coming years, I think policy rates are likely to rise, in my view, by 25bp to 50bp per year over the forecast period’.
BoE Governor Mark Carney also eased investor anxieties by arguing that there were some ‘temporary, idiosyncratic factors’ that limited growth in the first quarter, suggesting that it was merely a blip and not evidence of a disappointing trend.
This outlook ultimately lent support to the possibility of a rate rise as soon as June, though it would also appear that Carney’s later comments claiming that UK households are £900 worse off ‘because of Brexit’ weighed on positive sentiment, ultimately dragging GBP/CAD back down.
NAFTA Deadline Comes and Goes – What can we Expect for Canadian Dollar (CAD) Exchange Rates?
With the NAFTA deadline passing last week investors have been left wondering whether negotiations are in trouble, with parties still at a deadlock and an ‘agreement in principle’ between the US, Canada and Mexico currently seeming unlikely.
There is some remaining optimism, however, with the Trump administration giving both Canada and Mexico a 30-day exemption on steel and aluminium tariffs – with the possibility that further extensions could be granted depending on progress in NAFTA talks.
But what can we expect moving ahead?
On one hand, there are many within Washington (and indeed Canada and Mexico) that are seeking a quick conclusion.
On the other, however, there are rumours that another faction within Washington is pushing to engage in lengthier negotiations in order to achieve a better deal (possibly even into next year).
Combined, this ongoing back-and-forth has weighed on the ‘Loonie’ somewhat, but the currently soaring crude oil prices prevented it from going belly-up.
UK Inflation on the Horizon – Pound Canadian Dollar (GBP/CAD) Exchange Rate Forecast
Tomorrow’s big mover will be the UK’s consumer price inflation results for April, with a rise expected month-on-month from 0.1% to 0.5%.
If this occurs then we could see GBP/CAD rally once more, with accelerating inflation liable to push the BoE even closer to raising interest rates next month.
For the ‘Loonie’, trade talks between the US and China will likely continue to be a major influence, especially with Canada’s data calendar being rather sparse this week.