Although the Pound (GBP) has been dented by a dovish Bank of England (BoE) policy meeting, the Canadian Dollar (CAD) continues to trend lower as oil prices retreat further.
Dovish BoE Minutes Fail to Inspire Pound (GBP) Rally as Outlook Remains Muted
The recent bearishness of the Pound (GBP) continued yesterday after the Bank of England (BoE) voted 8-1 in favour of leaving interest rates unchanged at 0.50%, in a move that had been widely expected. Traders were not encouraged, however, by the decidedly dovish tone policymakers took with regards to the UK’s economic outlook. Concerns were raised over the negative impact of sliding oil prices on domestic inflationary pressure as global headwinds continue to drag on the UK economy, suggesting that the BoE remains in no hurry to start hiking interest rates in the near future.
However, the Canadian Dollar (CAD) has remained in generally weaker spirits as Brent crude fails to climb sufficiently out of the range of twelve-year lows. Pundits remain apprehensive of the building global supply glut, particularly as persistent slowness in China points to a weakening in demand, with little incentive to buy into the ailing commodity. Consequently the ‘Loonie’ has been dragged lower across the board, shoring up the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate.
UK Construction Output Contracts to Drag on Pound Sterling (GBP), Canadian Dollar Plunges Further as Oil Dips Below $30
Lower-than-expected Chinese New Yuan Loans have kept traders in a more risk averse mood on Friday morning, helping to push oil back below the $30 mark once again. With expectations that sanctions on Iran will be lifted within the next week, downwards pressure continues to build on the softened commodity, which economists have recently predicted could fall as far as $10 a barrel in the coming months.
Adding to the less positive outlook of the UK economy, Construction Output was today found to have contracted both on the month and on the year in November. Year-on-year output slumped from 1.0% to -1.1%, in a sign that is unlikely to reassure those fearful of the development of a housing bubble within the domestic market. Nevertheless, while the Pound has weakened this morning against a number of the majors the GBP/CAD exchange rate has remained on a strong uptrend.
GBP/CAD Exchange Rate Forecast: ‘Loonie’ Predicted to Trend Lower ahead of BOC Rate Decision
Demand for the Canadian Dollar is unlikely to pick up ahead of Wednesday’s Bank of Canada (BOC) interest rate decision. Although traders do not expect policymakers to slash rates at this particular outing a generally more dovish tone is anticipated, particularly in the wake of the Federal Open Market Committee (FOMC) having hiked interest rates in December.
Sterling, meanwhile, will be looking to rally on the back of the latest Consumer Price Index figures, with hopes for at least a slight uptick in domestic inflation. If the CPI fails to show signs of improvement though the GBP/CAD exchange rate may begin to cede some of its recent gains.
Current GBP, CAD Exchange Rates
At the time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was making gains around 2.0784, while the Canadian Dollar to Pound Sterling (CAD/GBP) pairing was slumped in the range of 0.4806.
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