GBP/CAD Exchange Rate Nosedives in Wake of BoE Rate Decision
The Pound Canadian Dollar (GBP/CAD) exchange rate initially ticked higher at the start of last week’s session as a lull in risk appetite drove markets towards the Pound (GBP).
Sterling was however met by a heavy sell-off in the second half of the week following the Bank of England’s (BoE) latest policy meeting.
The meeting saw policymakers vote to leave interest rates on hold this month, while also downgrading the bank’s growth forecasts for 2018 from 1.8% to 1.4%.
Meanwhile the Canadian Dollar (CAD) exchange rate was easily able to exploit the weakness in the Pound due to a surge in oil prices following concerns Iranian exports will be affected by the US withdrawal from the Iranian nuclear deal.
Sterling (GBP) Exchange Rate Stable as UK Pay Outpaces Inflation
The Pound (GBP) continues to struggle to find any traction against the Canadian Dollar (CAD) this week as markets react to the UK’s latest jobs report.
According to data published by the Office for National Statistics (ONS), basic pay growth crept up from 2.8% to 2.9% in March, accelerating faster than inflation for the first time in more than a year.
While this is a positive sign for the UK economy, the figures for total pay (including bonuses) revealed UK wage growth slowed from 2.8% to 2.6%.
This slide in overall wage growth reflected poorly on Sterling as it is likely to frustrate any plans by the BoE to accelerate its monetary tightening later this year.
However, preventing any major losses in the Pound this morning was the publications of the accompanying labour figures, with a stronger-than-expected rise in employment helping to hold the unemployment rate at a 42-year low of 4.2%.
Canadian Dollar (CAD) Exchange Rates Bolstered by Rising Oil Prices
At the same time the Canadian Dollar (CAD) looks poised to extend its advance this week as oil prices continue to tick higher.
Brent crude struck $78.60 a barrel earlier today, striking its best levels since late 2014 and helping to bolster the appeal of the crude-correlated ‘Loonie’.
The recent surge in oil prices has largely been driven by the potential for US sanctions to constrict Iranian exports, but has also found some underlying support from OPEC’s efforts to cut the global oil glut, something the organisation claimed it had achieved in its May oil report.
GBP/CAD Exchange Rate Forecast: BoE’s Haldane Speech to Drive Rates
Looking ahead the next major source of movement in the GBP/CAD Exchange rate is likely to be a speech by the BoE’s Andy Haldane on Thursday.
This could see the Pound (GBP) exchange rate tick higher if the BoE’s Chief Economist appears optimistic on the chances of the bank still targeting a rate hike at some point in 2018.
Conversely Sterling sentiment could plunge if Haldane strikes a more cautious tone or expresses concern over the lack of acceleration in UK wage growth.
Meanwhile the Canadian Dollar (CAD) may strengthen in the second half of this week’s session if the latest CPI figures reveal domestic inflation remained robust in April.
However the ‘Loonie’ could still be undermined if the accompanying retail figures show sales growth slowed in March, as forecast.