Bank of Canada Decision Offers Sharp Boost to GBP/CAD Exchange Rate
UPDATE: The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate surged higher this afternoon after the Bank of Canada (BoC) opted to leave interest rates on hold.
Even though this move was widely anticipated investors were not encouraged by signs of greater caution among policymakers, sending the Canadian Dollar (CAD) into a sharp slump.
Confidence in Pound Sterling (GBP), meanwhile, picked up thanks to hopes that the odds of a no-deal Brexit have fallen as a result of last night’s parliamentary vote.
GBP/CAD Exchange Rate Slips Back as Brexit Anxieties Weigh on Sentiment
UPDATE: The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate failed to hold onto almost all of its gains over the course of the day as Brexit anxiety picked up once again.
Demand for Pound Sterling (GBP) diminished as MPs prepared to debate Theresa May’s Brexit plan, with investors still wary of the prospect of the deal being voted down.
Even so, the Canadian Dollar (CAD) struggled to capitalise on its rival’s softening, continuing to lack any particular degree of support ahead of the Bank of Canada’s (BOC) interest rate decision.
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Recovers Ground on Robust UK Construction PMI
Demand for Pound Sterling (GBP) picked up sharply in the wake of November’s UK construction PMI, which bettered forecasts as business optimism rebounded from a near six-month low.
As the headline PMI picked up from 53.2 to 53.4 this encouraged greater confidence in the outlook of the construction sector.
Although construction only accounts for a slim percentage of the UK gross domestic product this improvement still gave the Pound a boost against its rivals.
With the construction sector largely shrugging off the persistent sense of Brexit-based uncertainty investors saw greater incentive to buy into the Pound, even in the wake of Monday’s disappointing manufacturing PMI.
This helped to push the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate higher, even as Bank of England (BoE) Governor Mark Carney defended the Bank’s Brexit analysis before MPs.
Underwhelming Canadian Growth Weighs on Canadian Dollar (CAD) Demand
After September’s Canadian gross domestic product data fell short of forecast ahead of the weekend the Canadian Dollar (CAD) came under some pressure.
Particularly concerning was the surprise contraction in growth on the month, with the -0.1% decline raising the odds of the Bank of Canada (BOC) leaving monetary policy on hold for longer.
Even so, as the latest thaw in trade tensions between the US and China encouraged a fresh bout of market risk appetite CAD exchange rates were able to recover some ground at the start of the week.
However, in spite of building market expectations of an OPEC-led production cut sending oil prices surging higher, the mood towards the Canadian Dollar remained rather sour.
GBP/CAD Exchange Rate Looks for Support from UK Service Sector
The GBP/CAD exchange rate may find further support on the back of Wednesday’s UK services PMI, which remains the major contributor to domestic growth.
Another stronger showing from the services PMI could see the Pound extending its gains across the board, potentially unwinding all of the week’s earlier losses.
Even if the headline PMI proves positive, however, the underlying details of the accompanying report may put the Pound under renewed pressure.
Evidence of weakening business confidence could drive investors to pile out of Sterling, especially if signs point towards slowing sector growth in the months ahead.
Friday’s BoE/TNS inflation attitudes survey may also weigh on GBP exchange rates as markets continue to assess the outlook of the UK economy.
Canadian Dollar (CAD) Exchange Rate Volatility Forecast on BOC Decision
While no change is forecast from the BOC’s December policy meeting this could still offer some encouragement to the Canadian Dollar.
Any signs that policymakers maintain a more optimistic view of the domestic outlook would give investors reason to support CAD, even though no interest rate hike looks likely in the near future.
If the BOC appears to lean towards greater dovishness, however, this could weigh heavily on the appeal of the Canadian Dollar.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate may also find a boost if the latest Canadian labour market data fails to impress on Friday.