Pound Canadian Dollar Exchange Rate Rises, Bank of England Ramp-Up Stimulus Measures

GBP/CAD Exchange Rate Edges Higher, BoE Injects £200bn Fiscal Stimulus Package

The Pound Canadian Dollar (GBP/CAD) exchange rate rose by 1% this morning after Sterling received a boost from the Bank of England’s (BoE) record-low 0.1% rate cut and a £200bn stimulus in corporate bonds to boost Britain’s economy. The pairing is currently fluctuating around CA$1.685.

Sterling traders reacted positively to the Bank’s move seeing it as a significant step toward lowing borrowing costs for businesses.

Yesterday also saw Prime Minister Boris Johnson claim that the UK could ‘turn the tide’ of Covid-19 in little over 12-weeks if individuals took the steps outlined by Downing Street and health officials.

With a light seemingly at the end of the tunnel, Sterling’s market appeal has returned on renewed hopes that the UK economy could make steady steps towards recovery.

The GBP/CAD exchange rate also ticked higher following reports that Chancellor Rishi Sunak would be preparing fresh stimulus measures designed to protect jobs and wages.

Dame Carolyn Fairbairn, the Director General of the Confederation of British Industry said:

‘Many other countries have now done this – France, Germany, Spain, Italy have put employee wage support in place and if that comes through quickly I believe there are businesses who will take a different decision because they want to keep their people and they want their businesses to be viable for when we recover.’

Canadian Dollar (CAD) Sinks Despite Stabilising Oil Prices

The Canadian Dollar (CAD) eased against the Pound (GBP) despite the oil-sensitive currency receiving modest support from a rebound in crude prices after OPEC demanded action to cut production.

David Rosenberg, the Chief Economist and Strategist of Rosenberg Research and Associates, said that the Canadian economy was, however, facing a 5-pronged economic battle:

‘We have a global demand shock going on, we have global supply shock going on simultaneously … a negative wealth shock on spending … We also have an oil shock, which for producers like Canada and now the U.S., is another huge negative on capital spending and employment in a critical part of the economy. And on top of that, we have a credit shock.’

Consequently, market appetite for the risk sensitive ‘Loonie’ remains slim as the oil price war is set to continue. Oil is Canada’s most important commodity and with any further slippage in prices – which look increasingly likely – the CAD could quickly lose its gains.

Today will see the release of Canada’s Retail Sales report for January, which is expected to rise from 0% to 0.3%. With Covid-19 remaining in focus, however, Canada’s economic data is unlikely to provide much boost for the risk-correlated currency.

GBP/CAD Forecast: Could Sterling Rise on Chancellor’s New Stimulus Package?

Looking ahead, the Canadian Dollar (CAD) is likely to face further volatility as the Covid-19 pandemic unfolds. Due to Canada’s trade-correlated as well as oil-correlated economy, the outlook for the ‘Loonie’ is becoming increasingly dim as many nations remain in lockdown.

Sterling could continue to pick-up against its peers if the Bank of England and the newly appointed Chancellor, Rishi Sunak, continue to step-up stimulus measures to help boost the British economy.

David Moore

Contact David Moore