GBP/CAD Exchange Rate Rangebound as COVID-19 Developments Remain in Focus
The Pound Canadian Dollar (GBP/CAD) exchange rate held steady today, with the pairing currently fluctuating around CA$1.714 after the Bank of Canada (BoC) cut its interest rate from 1.75% to 1.25% amid the global coronavirus outbreak.
The Bank of Canada said in its statement that COVID-19 continues to threaten Canada, and has weighed on business activity along with supply chains being disrupted. BoC also added:
‘This has pulled down commodity prices and the Canadian Dollar has depreciated. Global markets are reacting to the spread of the virus by repricing risk across a broad set of assets, making financial conditions less accommodative. It is likely that as the virus spreads, business and consumer confidence will deteriorate, further depressing activity.’
As a result, the Canadian Dollar (CAD) has begun to slip against some of its peers as the Canadian economic outlook continues to darken.
Today also saw the Canadian Labour Productivity gauge for the fourth quarter fall below consensus from 0.2% to -0.1%, further underlining the possible struggles ahead for the Canadian economy in 2020.
Pound (GBP) Exchange Rate Steady as UK Economic Outlook Continues to Darken
The Pound (GBP) struggled to gain against the Canadian Dollar (CAD) after February’s UK Markit Services PMI slipped below consensus from 53.3 to 53.2, leaving some Sterling traders concerned of a slowdown for the British economy going forward.
Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply, was downbeat in his assessment, commenting:
‘It feels like service companies are balanced on a set of scales where on the one hand favourable domestic market conditions and receding political uncertainty has boosted activity, but poor levels of export orders, concerns over future trade deals and now the coronavirus is likely to rob the sector of any headway.’
Looking ahead, we could see the GBP/CAD exchange fall further if the Bank of England’s Dr Ben Broadbent hints at any near-term rate cuts from the central bank.
With Sterling traders becoming increasingly jittery over the coronavirus’s impact on the British economy, and odds rising over a BoE rate cut, expect the Pound to remain subdued throughout this week.
GBP/CAD Outlook: BoE Statement in Focus
Pound (GBP) investors will be looking ahead to tomorrow’s speech from Mark Carney, the Governor of the BoE. If Mr Carney is downbeat in his analysis of the British economy or drops any further hints of a possible rate cut, we would likely see the GBP/CAD exchange rate sink further.
Tomorrow will also see Stephen S. Poloz, the Governor of the BoC, deliver a speech, with ‘Loonie’ traders will be paying close attention to any analysis of the Canadian economy going forward.
Coronavirus developments will continue to drive the GBP/CAD exchange rate this week. As a result, we could see the Canadian Dollar continue to fall if the global Covid-19 pandemic continues to escalate as this would directly impact the Canadian economy.