GBP/CAD Exchange Rate Edges Higher as BoC Buys Up Debt to Bolster Canadian Economy
The Pound to Canadian Dollar (GBP/CAD) exchange rate rose by 0.4% today, with the pairing currently trading around CA$1.761.
The Canadian Dollar (CAD) fell against the Pound (GBP) after the Bank of Canada (BoC) held its interest rates at 0.25%, saying that this was effectively as low as the BoC could go to tackle the economic impact of the coronavirus.
The BoC said in its statement:
‘The Canadian economy was in a solid position ahead of the COVID-19 outbreak but has since been hit by widespread shutdowns and lower oil prices.’
‘All the bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.’
The BoC said it would also start buying up to $50 billion in provincial debt and contribute up to $10 billion in corporate bonds to stimulate the Canadian economy throughout the coronavirus pandemic.
The oil sensitive ‘Loonie’ is also being beleaguered by falling oil prices as the oil market faces its lowest demand in 25 years. As a result, the outlook for the Canadian economy, which relies primarily on oil exports, continues to darken.
Pound (GBP) Exchange Rate Rises as Labour Leader Calls for Lockdown Plans
The Pound (GBP) rose against the Canadian Dollar (CAD) today on renewed hopes of clarity over the UK’s economic position going forward. This follows the new Labour leader’s – Kier Starmer – request for the government to release plans of how it will go about easing the nationwide lockdown.
However, growing concerns for the British economy continue to haunt UK markets after Chancellor Rishi Sunak said that he was ‘deeply concerned’ about the OBR’s prediction of a -35% fall in GDP.
Mr. Sunak commented:
‘I also, when I see these numbers, am deeply troubled.’
‘This is going to be hard. Our economy is going to take a significant hit and as I’ve said before that’s not an abstract thing. People are going to feel that in their jobs and in their household incomes.’
Pound (GBP) investors have shifted their attention from the Prime Minister’s health to the more pressing concern of the UK’s economy going forward. Therefore, if the UK’s economic outlook continues to deteriorate, we could see the GBP/CAD exchange rate shed some of its gains.
GBP/CAD Forecast: Could Sinking Oil Prices Further Weigh on the ‘Loonie’?
Canadian Dollar (CAD) investors will be awaiting tomorrow’s release of February’s Canadian Manufacturing Sales. Any signs of an improvement before the coronavirus took hold of the global economy would provide some relief for the ‘Loonie’
Pound (GBP) investors will continue to eye the UK’s coronavirus developments this week. If the coronavirus death toll continues to increase, we could see Sterling sink against its peers.
However, the Canadian Dollar will continue to be dictated by oil prices. If these continue to sink, we could see the GBP/CAD exchange rate extend its gains.