A warning from a former Bank of England (BoE) policymaker has kept the Pound down against the Canadian Dollar today.
Pound Slips as Traders Fret about UK Interest Rate Hike
Recent GBP/CAD fluctuations have occurred as a result of ongoing Brexit talks and interest rate-related remarks.
Giving a verdict on Bank of England (BoE) activities, former BoE policymaker Danny Blanchflower has warned that a November interest rate hike could be a bad idea.
Writing in the Guardian, Blanchflower cautioned that the UK economy is not strong enough to support a rate hike at present. He said;
‘The enhanced uncertainty over the form Brexit will take will constrain growth even further. Cut the stupid stuff. Britain is the sick man of Europe.
The UK was the slowest growing economy in the EU28 in the first quarter of 2017 and joint last in the second quarter. Pathetic growth of 0.5% for the first half of the year wins the UK the wooden spoon’.
With a November interest rate hike very far from certain, the possibility of it being the wrong decision has only further unsettled Pound traders.
Canadian Dollar Bolstered by Oil Price Gains
While the Pound has been struggling, the Canadian Dollar strengthened as oil prices approached a two-year high as Turkish President Recep Tayyip Erdogan threatened to cut off an oil pipeline that travels through Kurdistan.
On Monday Brent crude rose to $59.49, before slipping back to $58.60 on Tuesday.
BoE Speech Could Unsettle GBP/CAD
For the rest of the week, Pound/Canadian Dollar exchange rate movement could be the result of a speech from Bank of England (BoE) Governor Mark Carney on Thursday, as well as UK GDP stats on Friday.
As a temporary diversion from Brexit speculation, traders will be looking to see if Carney still backs higher UK interest rates. Any signs to this end might trigger a GBP CAD advance.
Conversely, the Pound could slide if annual UK GDP growth slows on Friday, as it is predicted to.
Apart from any oil price fluctuations, the Canadian Dollar may be affected by Wednesday’s speech from Bank of Canada (BOC) Governor Stephen Poloz.
This will be Poloz’s first notable speech since Canadian interest rates were unexpectedly raised to 1% at the start of September.
All eyes will be on the Governor to see if he hints at further interest rate hikes in the future. If Poloz suggests that more interest rate adjustments are on the cards, the Canadian Dollar could rally.