Canadian Dollar News: GBP/CAD Exchange Rate Strengthens as Central Bank Speculation Drives Markets

Positive Comments from BoE and Dovish Outlook from BoC Bolster GBP/CAD Exchange Rates

The Pound Canadian Dollar (GBP/CAD) exchange rate appreciated by around two cents last week as central bank speculation impacted both currencies.

Sterling sentiment climbed in the middle of the week as a speech by the Bank of England’s (BoE) Michael Saunders prompted speculation that the bank may raise rates in 2018.

The pairing did shed some of its gains on Friday however thanks to a nosedive in UK Retail Sales in December.

Meanwhile, the Canadian Dollar saw significant volatility in the second half of last week after the Bank of Canada (BoC) voted to raise interest rates on Wednesday.

With the move being widely priced in by investors ahead of time it failed to provide any lift for CAD, with the currency instead weakening as the Bank warned that NAFTA uncertainty could hinder any further rate hikes this year.

Sterling (GBP) Exchange Rates Stable Following Dramatic Drop in UK Public Deficit

The Pound is holding steady against the Canadian Dollar this week as the UK’s latest public borrowing figures defied expectations.

Data published by the Office for National Statistics (ONS) revealed that the public deficit narrowed from -£6.65bn to just -£0.98bn last month, easily beating expectations of a more modest improvement to -£4.2bn.

The improvement was largely thanks to a surge in VAT receipts and a £1.2bn credit rebate from the EU.

December’s impressive reading should help keep government finances on track to meet Chancellor Philip Hammond’s target of reaching a £49.9bn annual deficit in the 201718 financial year.

Canadian Dollar (CAD) Exchange Rates Resilient as Markets Await NAFTA Talks

At the same time, the Canadian Dollar is also showing resilience this morning as markets avoid making any major moves ahead of NAFTA talks later in the week.

Alvise Marino, foreign exchange strategist at Credit Suisse said;

‘Everybody is waiting to see what happens with NAFTA and with inflation at the end of the week.’

Given that 75% of Canada’s exports are destined for the US and further rate hikes from the BoC in 2018 are reliant upon the outcome of talks, any sign that Trump is planning to pull out of the agreement (as some observers suggest) could apply significant pressure to the Canadian Dollar.

GBP/CAD Forecast: Sterling to Climb if Wage Growth Improves?

Looking ahead, the GBP/CAD exchange rate may strengthen tomorrow if the UK’s latest employment data impresses investors.

Particular focus will be placed on the accompanying earning figures as markets will be eager to see whether wage growth is catching up with inflation.

While any gains for the Pound could prove to be short-lived if the UK’s latest GDP reading shows that growth slowed in 2017 as forecast, the Canadian Dollar may also struggle with both Canada’s latest retail sales and inflation figures expected to disappoint.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon