The Pound has dropped sharply against the Canadian Dollar today, following a pessimistic statement from Bank of England (BoE) Governor Mark Carney.
Pound Battered by Reduced UK Rate Hike Odds
In the lull before Parliament is officially opened, the Pound has fallen sharply against the Canadian Dollar. The downward lurch has been caused by Carney, who was speaking at a Mansion House event.
Speaking as UK-EU Brexit talks finally get underway, Carney was dovish on the UK economic outlook. Crucially, the Governor stated that he was not yet ready to opt for higher UK interest rates, due to present economic instabilities.
Carney’s ‘wait and see’ attitude has combined negatively with news of a potentially dovish replacement to the BoE’s Kristin Forbes. Forbes was one of three policymakers who voted for an interest rate hike last week, so this news has further dampened rate hike expectations.
Canadian Dollar Advances despite Oil Price Slump
The Canadian Dollar’s rise against the Pound today has mainly been due to Sterling weakness.
On the Canadian side, crude oil prices have slumped, dropping to under US$43.80 per barrel.
Such news worsens conditions for Canadian oil exporters.
GBP/CAD Exchange Rate Forecast
This week, Pound Canadian Dollar exchange rate movement may occur on Wednesday’s state opening of Parliament, along with UK government borrowing figures.
The planned start to the new Conservative and DUP government has been variously delayed by terror attacks and the Grenfell disaster, but Parliament is finally expected to open on Wednesday.
This could push the Pound up against the Canadian Dollar, although there are some caveats to the auspicious occasion.
Notably, Transport Secretary Chris Grayling has stated that the Conservative-DUP deal may not actually be finalised until after the Queen’s Speech. If this is the case, then opening parliament on a half-formed government could weaken the Pound instead of strengthening it.
Also out on Wednesday will be the government borrowing results for May. A deficit reduction from -9.65bn to -7bn is forecast, which could provide some support for Sterling.
Elsewhere, news from Brussels may also influence the GBP CAD exchange rate. If it looks like Brexit talks are progressing smoothly then the Pound could appreciate.
Upcoming Canadian data will include sales figures on Thursday, along with inflation rate stats on Friday.
Late-week retail sales stats are forecast to show a monthly slowdown but a rise from -0.2% to 0.7% is predicted for the figures excluding vehicle sales. The base figure is considered more high-impact, so the Canadian Dollar could dip if forecasts prove accurate.
At the end of the week, Canadian inflation in May is forecast to dip, both on the month and the year.
This could lower the chances of a Bank of Canada (BOC) interest rate hike, which in turn may weaken the Canadian Dollar.