Pound Rises against Canadian Dollar (GBP/CAD) as Growth Comes in Above Zero Percent
UPDATE: The Pound to Canadian Dollar has recovered most of its weekly losses today, but its gains were limited by the latest Canadian growth data.
Canada’s August Gross Domestic Product (GDP) growth was expected to have slowed from 0.2% to a stagnant 0.0%. However, the figure unexpectedly came in at a somewhat-better 0.1%. Canadian PPI also beat expectations in September according to the figures.
GBP/CAD Suffers Heavy Losses as Bank of Canada Hikes Interest Rates and Pound Continues to be Battered by Brexit Worries
Pound to Canadian Dollar exchange rate has seen significant losses throughout last week and into this one, with Sterling currently trading at an inter-bank rate of CA$1.672.
GBP/CAD has lost over two cents since the start of last week, partly on concerns that the UK and EU would not be able to reach a Brexit deal, or that politicians could block such a deal even if it was agreed.
Wednesday’s rate rise from the Bank of Canada (BoC) had the effect of enabling the Canadian Dollar to capitalise on the Pound’s weakness, with the bank’s subsequent hawkish tone on monetary policy giving CAD investors a boost.
The BoC said it was now possible to ramp up the pace of its interest rate hikes as the economy was running close to full capacity and did not need any further stimulus.
Canadian Dollar’s (CAD) Rally Capped by Slumping Oil Prices and Global Risk Aversion
The Canadian Dollar’s rally against the Pound was short-lived in the end, with the currency’s appeal weighed down towards the end of the week by financial turmoil leading to global risk-aversion as investors sought safe havens.
Not helping CAD was a marked slump in oil prices, with the benchmark Brent crude falling back from its highs of almost $85 a barrel to a much lower $76.
The lower oil price effect has been exacerbated by supply problems, with several factors including pipeline outages, restricting exports south to the refineries in the US, as well as heavy discounting by Canadian suppliers.
CAD Outlook: GBP/CAD Gains Unlikely to be Significant without Brexit Breakthrough
Following yesterday’s UK budget, the Pound has continued to lose ground against the ‘Loonie’, slipping around 0.5% today.
UK Chancellor Phillip Hammond unleashed £100bn in spending and tax breaks, although it failed to give GBP rates much of a boost with investors shrugging off the stimulus and choosing instead to refocus on Brexit concerns.
Tonight’s Gfk consumer confidence report could point to a further slowing of spending across the UK, which would exert some limited downside influence on GBP/CAD rates.
In the same vein, Thursday’s Bank of England (BoE) interest rate decision is not expected to bring any surprises and so will likely have a limited effect on the Pound.
Noteworthy Canadian data will be published in the second half of the week, with Canadian growth data coming out tomorrow, and manufacturing PMI stats and Canadian job market data on Friday.
The Canadian Dollar could also react to any further swings in risk sentiment this week, especially given the turmoil in global equity markets and the plunging Chinese Yuan (CNY), which may pressure CAD lower over the coming days.