Pound to Canadian Dollar Exchange Rate: GBP/CAD Close to 2-Month Low Following BoC Rate Hike Forecasts

Pound to Canadian Dollar Exchange Rate Falls, Economists Forecast BoC May Raise Interest Rates this Month

The Pound Canadian Dollar (GBP/CAD) exchange rate is holding close to two-month low today after a number of economists suggested that the Bank of Canada (BoC) may seek to raise interest rates in January.

This follows a week of volatility for the pairing as the Pound fluctuated in reaction to some mixed PMI stats, which suggested that activity in many sectors of the UK economy had slowed at the end of 2017.

The Canadian Dollar, meanwhile, fared a little better thanks to a better than expected domestic employment report, which saw the jobless rate fall to its lowest levels since 1970.

Canadian Dollar (CAD) Exchange Rates Bolstered by BoC Rate Hike Optimism

Canadian Dollar (CAD) exchange rates are currently holding close to the highs stuck at the start of the week as investors mull over the possibility of the BoC voting to raise interest rates later this month.

This sudden rise in optimism comes on the back of the release of Canada’s Business Outlook Survey on Monday.

The survey – which is a major barometer of business sentiment- revealed that confidence amongst Canadian firms is currently at its highest levels since last summer, the point at which the BoC first moved to raise interest rates.

This follows hot on the heels of Canada’s impressive employment data last week, which had already prompted some speculation that the BoC may speed up the pace of monetary tightening.

Josh Nye, economist at the Royal Bank of Canada (RBC) said;

‘We think last Friday’s impressive employment report tipped the scales in favour of a January rate hike, and today’s release of the Business Outlook Survey gives further weight to that view.’

Pound Sterling (GBP) Exchange Rates Subdued on Possibility of ‘No Deal’ Minister

At the same time, Pound Sterling (GBP) exchange rates are struggling to advance today as markets reacted to reports that the Prime Minister may be seeking to create a new ‘no deal’ ministerial position in her cabinet.

The idea is to have a minister whose job it will be to plan and prepare for a ‘no deal’ Brexit scenario which would see the UK crash out of the EU without a new trade deal in place.

Markets fear that this may be a sign that Theresa May is already accepting that negotiations will fail to result in a deal and that the hardest of Brexits is inevitable.

Such a scenario would see the UK fall back to WTO tariffs for trade with the EU, something which some economists forecast could cost the UK up to 5% of GDP over the next ten years.

Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: UK Trade Deficit to Widen?

Looking ahead, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate may trend lower on Wednesday with the publication of the UK’s latest trade balance figures.

Economists forecast that the figures will show that the UK’s trade deficit widened again in November after shrinking to £1.4bn in October.

However, any losses in the Pound tomorrow could be offset by the accompanying industrial production figures as analysts predict that factory output will have risen 0.3% after remaining flat in October.

Meanwhile the Canadian Dollar may be strengthened later in the week by the release of Canada’s latest House Price Index, with forecasts that price growth will have climbed from 0.1% to 0.2% in November.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron


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