GBP/CAD Exchange Rate Falls as Canada’s Economic Slump is a ‘Long Way Back’
The Pound to Canadian Dollar (GBP/CAD) exchange rate dipped today, with the pairing currently fluctuating around CA$1.700.
The Canadian Dollar (CAD) rose against a weaker Sterling today, despite growing concerns for Canada’s economy both during the coronavirus pandemic and in the months ahead.
This follows comments from the Bank of Canada Governor’s (BoC) Tiff Macklem, who commented that it would take considerable time for the economy to recover.
‘For now and for the foreseeable future, we are focused on providing the monetary stimulus and delivering low interest rates to support the recovery.’
‘You can expect purchasing power and confidence of Canadians … to be severely affected… I would stress that even the good case is still pretty bad. We’ve seen an unprecedented decline in economic activity and it’s a long way back.’
Meanwhile, Canadian Dollar (CAD) investors are awaiting today’s release of the BoC’s CPI report for May. As a result, any signs of improvement in Canada’s inflation figures could see the CAD/GBP exchange rate edge higher.
CAD is also suffering from sinking oil prices today, with growing fears that a potential second-wave could knock-out demand from oil. Consequently, this has weighed down the oil sensitive ‘Loonie’, with Canada being one of the world’s major oil exporters.
Pound (GBP) Falls as UK Inflation Falls in May
The Pound (GBP) suffered today after the UK inflation figures for May confirmed forecasts and fell to four-year lows. The year-on-year figure fell from 0.8% to 0.5%.
ONS deputy national statistician for economic statistics Jonathan Athow commented on the report:
‘The growth in consumer prices again slowed to the lowest annual rate in four years.’
‘Outside these areas, we are seeing few significant changes to the prices in the shops.’
Brexit news has once again returned, with Sterling investors feeling more optimistic yesterday after Prime Minister Boris Johnson said that an agreement could be reached in July with ‘a bit of oomph’.
However, these hopes were seemingly contradicted by a German government document, dated 15th June, which stated:
‘From September the negotiations enter a hot phase. Britain is already escalating threats in Brussels, wants to settle as much as possible in the shortest possible time and hopes to achieve last-minute success in the negotiations.’
GBP/CAD Outlook: BoE Interest Rate Decision in Focus
Canadian Dollar investors will be awaiting tomorrow’s speech from Lawrence Schembri, the Deputy Governor of the Bank of Canada (BoC). Any dovish comments about the Canadian economy would prove CAD-negative.
Sterling traders will be looking ahead to tomorrow’s announcement of the Bank of England’s (BoE) interest rate decision. However, with the bank expected to hold rates at 0.1% this will likely have little affect on GBP.
However, if the BoE is notably dovish in its Monetary Policy Summary, we could see the GBP/CAD exchange rate continue to fall.
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