Pound to Canadian Dollar (GBP/CAD) Exchange Rate Slips Again as UK Inflation Stagnates

Pound to Canadian Dollar Exchange Rate Recovery Stops Short amid Central Bank Bets

With Bank of England (BoE) interest rate cut bets rising and Bank of Canada (BoC) interest rate cuts low, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate has been struggling to sustain gains.

Since opening this week at the interbank level of 1.70, GBP/CAD has dipped to a two-month-low of 1.69.

GBP/CAD recovered from its worst levels since November yesterday. However, the pair remains around half a cent below the week’s opening levels and is struggling to hold above the key interbank level of 1.70 again.

The Pound (GBP) remains under pressure as UK data continues to disappoint investors. Surprising data near the end of the week could still cause further shifts in movement for the Pound and Canadian Dollar though.

Pound (GBP) Exchange Rates Struggle to Hold Tuesday Gains amid Stagnant UK Inflation

The Pound (GBP) rebounded from its worst levels yesterday. It was due to speculation that a second Scottish independence referendum was unlikely, which softened political uncertainty.

Bank of England (BoE) interest rate cut jitters took a moment of reprieve yesterday as well. BoE rate cut bets had only reached around 50%, so the Pound clawed back some of Monday’s sharp losses.

However, the latest UK data and BoE news only left investors more anxious about the possibility of a BoE interest rate cut today.

Bank of England policymaker Michael Saunders, who voted for a rate cut in December, indicated that he would likely vote for another rate cut.

On top of this, Britain’s latest inflation results fell short of forecasts, unexpectedly stagnating at 0.0% month-on-month in December. It was the worst inflation rate for three years, and added to bets of a January rate cut from the BoE.

Canadian Dollar (CAD) Exchange Rates Lack Drive but Supported by Bank of Canada Speculation

The Canadian Dollar (CAD) has been among the best performing major currencies in recent weeks. While the currency’s movement is a little more mixed today, it is still relatively near highs against many rivals.

Prices of oil, Canada’s most lucrative commodity, have been weakening since last week. As a result, the oil-correlated Canadian Dollar has felt a little extra pressure.

However, overall strong Canadian data has kept investors confident that the Bank of Canada (BoC) will avoid dovish monetary policy. This is keeping CAD broadly supported.

For now, Canadian Dollar investors are focusing on other currencies like the US Dollar (USD) and Australian Dollar (AUD) amid major US-China trade relations. The CAD outlook remains overall optimistic though.

Pound to Canadian Dollar (GBP/CAD) Exchange Rate Could See Further Pressure on Upcoming Data

The Pound (GBP) is on track to end this week lower. Amid poor UK data and dovish comments from Bank of England (BoE) officials, Bank of England (BoE) interest rate cut bets show no sign of lightening.

In fact, with BoE rate cut bets rising and Bank of Canada (BoC) policy speculation generally more optimistic, the Pound to Canadian Dollar (GBP/CAD) exchange rate could still be in for further losses in the coming sessions.

Thursday will see the publication of Canada’s December employment change results from ADP, This could offer the Canadian Dollar some fresh support if it impresses.

It will be followed on Friday by another influential UK dataset. If Britain’s December retail sales results fall short, they could worsen concerns that consumer activity was not as resilient as hoped at the end of 2019. This would worsen BoE interest rate cut bets.

The Pound to Canadian Dollar (GBP/CAD) exchange rate may struggle to advance unless UK data takes a surprising turn for the positive.

Josh Jeffery

Contact Josh Jeffery


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