Pound to Canadian Dollar Exchange Rate Flounders near Worst Levels Ahead of BoC
Despite concerns about Canada’s low rate of inflation, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is trending near its worst levels today. Revived no-deal Brexit fears continue to push the Pound (GBP) lower and lower.
Even amid a weaker outlook this week, the Canadian Dollar continues to rally. Last week saw GBP/CAD slide from the level of 1.7488 to 1.7347 throughout the week, and this week has seen even steeper losses.
GBP/CAD has already lost over two cents since opening this week. At the time of writing, GBP/CAD is trending close to lows of 1.7112 – the worst levels for the pair since July.
Markets are awaiting developments in UK-EU Brexit negotiations, as well as this afternoon’s Bank of Canada (BoC) policy decision. Any surprises in these events could be notably impactful for the Pound to Canadian Dollar exchange rate.
Pound (GBP) Exchange Rates See Deeper Losses amid No-Deal Brexit Panic
Panic that the UK government could cause UK-EU Brexit negotiations to collapse and head right for a no-deal Brexit has been dominating the Pound this week.
After a while on the backburner, Brexit fears have returned full force to the outlook this week. Investors have been selling Sterling en masse amid concerns that a no-deal Brexit is becoming more and more likely.
Analysts are increasingly predicting that a no-deal Brexit is likely. This includes credit ratings agency Fitch.
On top of no-deal Brexit jitters, the Pound is also being weighed by fears that Britain’s coronavirus situation is worsening again. Markets are anxious that rising coronavirus infections in the country will lead to fresh lockdowns towards the holiday season.
Canadian Dollar (CAD) Exchange Rates Benefit from Oil Ahead of Bank of Canada (BoC)
The Canadian Dollar (CAD) has been one of the stronger major currencies in recent weeks. Even as market risk-sentiment takes a hit this week, the Canadian Dollar is still up due to the Pound’s plunges.
On top of Sterling weakness though, GBP/CAD is also being pressured by other factors supporting the Canadian Dollar this week.
For example, prices of oil, Canada’s biggest export, have been rebounding in recent sessions.
This, as well as some resilience in market risk-sentiment, is keeping the Canadian Dollar afloat ahead of the Bank of Canada’s (BoC) September policy decision this afternoon.
Concerns over Canada’s inflation outlook are keeping CAD from climbing too much, but overall the currency is steady ahead of the policy decision.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Outlook Could be Influenced by BoC
Brexit developments are likely to remain the focus for the Pound to Canadian Dollar exchange rate throughout the week. Any surprises in UK-EU Brexit negotiations could lead to notable GBP/CAD movement.
However, investors will also be closely watching this afternoon’s Bank of Canada (BoC) policy decision.
The BoC is not expected to make any changes to monetary policy, but markets are still anxious about Canada’s weaker inflation outlook.
According to Joseph Trevisani, Analyst at FXStreet:
‘At its September meeting on Wednesday, the BoC is widely expected to hold the policy rate at 0.25% and permit inflation at a wider latitude effectively pinning rates at the zero bound for the foreseeable future. Governor Tiff Macklem has recently indicated that the bank would not increase rates until 2023.’
If there any surprises from the bank’s tone, the Canadian Dollar could see a shift in direction. Movement in oil prices will also remain a focus for CAD.
Overall, Brexit developments and Bank of Canada (BoC) news could influence the Pound to Canadian Dollar (GBP/CAD) exchange rate outlook.