GBP/CAD Exchange Rate Softens on Robust Canadian CPI Figures
Update: The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate drifted back from its best levels this afternoon as markets cheered the release of Canada’s latest CPI figures.
According to data published by Statistics Canada, domestic inflation leapt from 2% to a seven-month high of 2.4% in May, potentially making the case for the Bank of Canada to stay its hand when it comes to cutting rates in the future.
Meanwhile, the Pound remained buoyed in broader trade, with GBP investors welcoming reports that Jeremy Corbyn is preparing to support calls for a second referendum.
Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Flat In Wake of UK CPI Figures
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is rangebound this morning as markets digest the UK’s latest Consumer Price Index.
At the time of writing, the GBP/CAD exchange rate is trading at around CA$1.6824, leaving the pairing slightly up from this morning’s opening levels.
Pound Sterling (GBP) Exchange Rates Muted Following Slowdown in Inflation
The Pound (GBP) is holding its ground against the Canadian Dollar (CAD) and the majority of its other peers this morning as markets reacted to the UK’s latest CPI figures.
According to data published by the Office for National Statistics (ONS) domestic inflation slowed from 2.1% to 2% in May, which was in line with market expectations.
The slowdown in inflation was mostly attributed to easing transport costs and falling car prices, which offset rising prices for toys and hobbies, furniture and accommodation services.
Commenting on the fall in transport costs, the ONS said:
‘Transport fares fell by 3.8% overall between April and May this year, with the April prices influenced by Easter and the associated school holidays falling in the middle of the month.
‘In 2018, when Easter fell in early April before the price collection dates, fares rose between April and May by 2.0%. The contribution from transport services came from all categories – air, sea, rail and road – with the single largest contribution from air transport.’
With some economists forecasting that inflation could have fallen to 1.9% or even as low as 1.8%, it appears that the resilience in Pound Sterling (GBP) exchange rates this morning comes from GBP investors who were relieved that inflation remains within the Bank of England’s (BoE) target range.
Canadian Dollar (CAD) Exchange Rates Buoyed by Oil Rally
Meanwhile, Canadian Dollar (CAD) exchange rates remain robust this morning as the oil-sensitive currency finds support thanks to the rally in crude prices on Tuesday.
This upswing in oil prices appeared to be driven by a tweet from Donald Trump, suggesting that he expects to hold an extended meeting with Chinese President XI Jinping at the G20 summit later this month.
The remark sparked renewed optimism that the two powers may be able to resolve their trade dispute, with the resulting upswing in risk sentiment also reflecting well on the Canadian Dollar (CAD).
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: BoE Policy Decision in Focus Tomorrow
Looking ahead, the main catalyst for movement in the Pound Canadian Dollar (GBP/CAD) exchange rate over the second half of this week’s session will likely be the BoE rate decision tomorrow.
While no policy changes are expected from the BoE this month, after previously suggesting that markets were ‘underestimating’ the pace at which the bank will raise interest rates, all eyes will be on BoE Governor Mark Carney to see if he remains as hawkish, as signals point to a slowing global economy.
In the meantime, Canada will publish its own CPI report later this afternoon, with the Canadian Dollar (CAD) exchange rates potentially gaining ground if domestic inflation accelerated in line with forecasts, possibly giving a reason for the Bank of Canada to stay put with interest rates for the time being.