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Pound Canadian Dollar (GBP/CAD) Exchange Rate Forecast: BoC to Stick to Neutral Rate Target?

Canadian Dollar Currency Forecast

GBP/CAD Exchange Rate Steady Ahead of BoC Meeting

The Pound Canadian Dollar (GBP/CAD) exchange rate traded in a narrow range on Wednesday morning ahead of the first major central bank rate decision of 2019.

At the time of writing the GBP/CAD exchange rate is virtually unchanged from the morning’s opening levels, having struck a four-week low overnight.

BoC Rate Decision to Strengthen Canadian Dollar (CAD) Exchange Rate?

The Canadian Dollar (CAD) is range bound this morning as markets brace for the Bank of Canada’s (BoC) first rate decision of the year.

After implementing three rate hikes in 2018, markets had previously forecast that the BoC may maintain this rate trajectory through 2019 as well, potentially allowing for a rate hike in January.

However a recent run of disappointing domestic data as well as growing concerns of a global slowdown has seen economists revise these forecasts in recent week, with analysts predicting the next hike from the BoC may now be some way off.

While a hike may no longer be on the cards this month, CAD exchange rates may still strengthen in the wake of the decision depending on the tone struck by BoC Governor Stephen Poloz in his accompanying remarks.

The focus will mainly be on whether Poloz maintains the bank’s plans to raise interest rates to a ‘neutral range’, estimated by the BoC to be between 2.5% and 3.5%

Mark Chandler, head of Canadian currency strategy at RBC Capital Markets suggests:

‘I think there are people thinking that the bank will stick to its guns a little bit, at least in terms of eventually getting back to neutral, and if so that should be supportive of the currency’

GBP/CAD Exchange Rate Forecast: Brexit Sentiment to Prompt Sterling Volatility.

Looking past the BoC rate decision, the Pound Canadian Dollar (GBP/CAD) exchange rate is likely to be dominated by Brexit sentiment over the coming week ahead of a parliamentary vote on Theresa May’s EU withdrawal deal on 15 January.

This is likely to result in considerable volatility in the Pound, especially if it appears as though MPs will reject the deal, for fears it will lead to a no-deal Brexit.

Meanwhile in the absence of any notable domestic data, movement in the Canadian Dollar through the second half of the week may be driven by external factors, something that may prove positive for the ‘Loonie’ if oil prices continue to accelerate.