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Pound Sterling to Canadian Dollar Exchange Rate Forecast: GBP/CAD Steady as Canadian Inflation Falls

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The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has reached something of a standstill after global data from the last few days caused fluctuations in both currencies.

Bank of England’s (BoE) Interest Rate Decisions Unanimous –Boosts Pound (GBP) Exchange Rate

Following a month of weakness in the Pound, its descent seems like it may finally be slowing after Thursday’s Bank of England announcement left pessimistic analysts and investors pleasantly surprised. The pair currently trades at 1.8795 and is holding steady, though it has dropped slightly from this morning’s opening levels of 1.8804.

The exchange rate fell to its lowest point since May 2015 shortly before the BoE’s minutes were released as investors prepared themselves for further bad news to follow this week’s dovish UK budget – bad news that didn’t actually come.

Analysts and investors alike had expected the central bank, which ended 2015 on a hawkish note, to have been jostled enough by 2016’s economic stresses and hint that an interest rate cut may be possible later in the year.

However, fears were alleviated after all policymakers agreed to freeze the rate at its current 0.50%. While this record-low British interest rate now enters its seventh year, this cleared the immediate future of many concerns surrounding the Pound, allowing policymakers to focus on thinking about what action to take after June’s EU referendum. Investors also returned to the Pound in droves, causing some of the currency’s most bullish movements of recent weeks.

Federal Reserve Disappointment and Oil Price Climb Leaves Canadian Dollar (CAD) Healthy

Global risk-sentiment increased earlier this week due to the Federal Reserve’s now-infamous decision to hedge rate hike forecasts throughout 2016.

The previously hawkish central bank announced this week that they would likely make less interest rate hikes than previously expected, causing disappointed investors to leave the US Dollar weak in favour of riskier currencies, such as those in the commodity bloc.

This increased investor risk lines up well with today’s news that oil prices had finally climbed to a new 2016 high, briefly rallying above $41 per barrel after a longwinded period of weak oil pricing.

As Canada’s biggest commodity export, the oil news had already high-risk investors looking very favourably towards the Canadian Dollar as it managed to use bullish oil news to hold back Sterling’s newfound strength.

Canadian CPI and retail data also came in earlier today. While most of the vital data was negative, with CPI falling below estimates across the board, retail sales were considerable higher than expected in January. Reaching 2.1% growth over the previous month’s -2.1%, this was a bullish rise from the forecast 0.6% growth in consumer spending.

This mixture of positive and negative data was unable to cause any particular uptrend or downtrend in the GBP/CAD pairing as both currencies experienced continued sturdiness from positive investor sentiment, leaving it trending steadily as the week draws to a close.

Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Will Oil Prices Continue to Climb?

With no vital Canadian data set for release next week, the GBP/CAD pair is likely to fluctuate more on the whims of the Pound as well as the global market rather than as a result of any domestic information from Canada.

While some analysts predict and hope that the oil crisis is finally starting its real recovery and prices will begin to return to normalcy, other analysts wonder if it’s too premature to expect the crisis to be ending soon.

Worries surrounding Iran’s refusal to join the ‘oil freeze’ could potentially cause future obstacles in the commodity’s recovery path, as many nations will not participate in a potential ‘freeze’ until all other major nations have agreed to do so.

Damage control measures from the US or calmed risk-sentiment would also send investors back towards the safe-haven US Dollar (USD) and away from the ‘Loonie’. The traditionally strong USD is unlikely to remain weak for a long time, despite hugely bearish movements this week.

Sterling’s strength may be even more temporary as CPI and retail data releases for Britain are due throughout next week. A combination of negative data and continued ‘Brexit’ discussions in the news may once again drive investors away from the nervous Pound. Bullishly positive CPI on the other hand could very well lead to the Pound holding on to its current strength a little longer and even starting a climb against the riskier CAD.

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.8795 while the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate trends in the region of 0.5314.

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