Canadian Dollar Today: Tensions ahead of BoE Interest Rate Decision Keep GBP/CAD Exchange Rate Steady

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Losses Reduced ahead of BoE Interest Rate Decision

The Pound has traded in a narrow range against the Canadian Dollar this afternoon, in the lull before Thursday’s Bank of England meeting.

This improvement compared to earlier losses may be down to Foreign Secretary Boris Johnson’s assertion that the UK will remain part of the Iran nuclear deal.

This might mean that any damage from the US withdrawal is reduced, in turn limiting any additional growth in crude oil prices and preventing further CAD gains.

Risk of BoE Freezing Interest Rates also Helps Trigger GBP/CAD Exchange Rate Decline

The Pound (GBP) has fallen by -0.3% against the Canadian Dollar (CAD) today, ahead of a crucial meeting of Bank of England (BoE) policymakers.

BoE officials will meet at noon on Thursday, but a string of poor UK data releases have raised concerns that there will be no rate adjustment this month.

Explaining the background of this gloomy outlook, Sajiv Vaid of Fidelity said:

‘There have been clear signs that the UK is growing slower than they expected.

‘[This is] highlighted by Q1 GDP, which showed the UK economy growing by the slowest quarter since Q4 2012 at a paltry 0.1%, and a weak manufacturing PMI indicating that weak first quarter data may be extending into Q2.’

Making the case against an interest rate hike in May, Mr Vaid added that:

‘A May hike would represent a policy mistake in my opinion and unless accompanied by a markedly dovish tone, would also raise questions about the BoE’s credibility which is just about intact … for now.’

Rising Oil Prices Cause Canadian Dollar to Pound Exchange Rate Advance

The Canadian Dollar to Pound (CAD/GBP) exchange rate has seen a moderate rise today, correlating with a sharp rise in crude oil prices.

The cost of WTI crude has recently jumped above $71 per barrel, following the news that the US will be withdrawing from the Iran nuclear deal (and potentially imposing sanctions).

The presumed sanctions have been the greatest influence on commodity prices, as both European and Asian nations are expected to be forced to reduce their import levels.

If Iran responds to these conditions by reducing oil extraction then the price of crude could rise further, pressuring some nations but benefiting others, like Canada.

Pound to Canadian Dollar Exchange Rate Forecast: High GBP/CAD Volatility ahead on BoE Interest Rate Decision

For the rest of the week, Pound/Canadian Dollar exchange rate movement will mainly be dictated by Thursday’s Bank of England (BoE) interest rate decision.

The eagerly-awaited meeting may end up triggering a GBP/CAD decline, as it is forecast there will be no adjustment to the current interest rate of 0.5%.

This is a downgraded prediction compared to a month ago, when economists and Pound (GBP) traders were looking forward to a potential rate hike up to 0.75%.

Keeping the interest rate frozen at 0.5% would not surprise the markets, but it could still cause disappointment and trigger GBP/CAD exchange rate losses.

This week’s main Canadian economic data will come a day later on Friday, consisting of jobs market figures for April.

The readings are tipped to show no change to the Canadian unemployment rate, but a 17.4k rise for the employment change reading could still boost CAD.

Full-time employment is expected to rise and part-time work is tipped to fall, which may further support the Canadian Dollar to Pound exchange rate.

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