Pound to Canadian Dollar Exchange Rate Near Monthly Highs Ahead of Canadian Growth
Continued reaction to a more dovish Bank of Canada (BoC), combined with coronavirus jitters, have led to easy Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate gains this week. However, strong Canadian data could help CAD mount a recovery.
GBP/CAD opened this week at the interbank level of 1.71., The pair briefly slipped lower, before seeing a jump in demand towards the end of the week.
At the time of writing on Friday, GBP/CAD trends in the interbank region of 1.73. This is the best level for GBP/CAD in a month – since December 2019.
CAD demand has been mixed. However, if this afternoon’s Canadian growth data impresses investors it could hit the Pound to Canadian Dollar exchange rate lower again.
Pound (GBP) Exchange Rates Extending Gains despite Brexit Uncertainty
Yesterday saw the Bank of England (BoE) leave UK interest rates on hold. This was broad market speculation that the bank could cut rates.
The BoE Monetary Policy Committee (MPC) voted once again 7-2 to leave rates frozen. It meant no policymakers had taken a dovish shift since the previous decision.
Overall the decision was seen as being more optimistic than many expected, and the Pound (GBP) surged. Sterling continued to climb today, despite it being the day Britain formally leaves the EU.
Some analysts believe that the Pound’s current gains may be limited. According to Morten Lund, Strategist at Danske Bank:
‘Looking ahead, there are more downside risks to the Pound as investors gauge the progress of the Brexit negotiations,’
Canadian Dollar (CAD) Exchange Rates Dampened by Bank of Canada (BoC) and Risk-Sentiment
Despite months of economic hopes boosting the Canadian Dollar’s (CAD) performance, the currency has been weaker since the Bank of Canada (BoC) signalled it would leave the door open for a potential interest rate cut.
BoC rate cut speculation left the Canadian Dollar less appealing. This meant that the currency has been knocked lower more easily, by market risk-aversion.
The Canadian Dollar is correlated to market trade and commodity-sentiment. As oil is Canada’s biggest export and oil prices have been hit much lower by global coronavirus jitters, CAD has also seen weakness in reaction to coronavirus jitters.
Markets hope that Canada’s economic outlook remains fairly strong overall though. According to Petr Krpata, anticipation for upcoming Canadian growth data could lead to CAD gains:
‘After a dovish shift in the Bank of Canada’s message last week, markets will keep a close eye on Canadian data to weigh the possibility of a cut in coming months. November GDP data out today is expected to come in flat month-on-month, but our economics team does not exclude the possibility of a marginal upside surprise.’
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Awaits Canadian Growth
The Pound to Canadian Dollar (GBP/CAD) exchange rate has been driven more by Sterling (GBP) strength in recent sessions. The Canadian Dollar (CAD) could see stronger movement depending on upcoming Canadian data.
This afternoon sees the publication of Canada’s Gross Domestic Product (GDP) growth rate data from November, which is expected to edge away from contraction and print a stagnant 0.0%.
Some analysts speculate an upside surprise is possible. If Canadian growth data beats forecasts, it could offer the Canadian Dollar could stronger support and push GBP/CAD lower before markerts close for the week.
On top of this, analysts speculate that Brexit uncertainty could being to weigh on the Pound (GBP) again soon.
Looking ahead to next week, UK and Canadian PMIs, as well as key Canadian trade and job market data, could influence the Pound and Canadian Dollar.
Further developments in coronavirus and oil prices could also drive Pound to Canadian Dollar (GBP/CAD) exchange rate movement.