Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Falls After ‘Short-Term’ BoE Boost
UPDATE: The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate slumped by 1.3% this afternoon, leaving the pairing trading at around CA$1.7230.
This morning’s Sterling rally was short-lived as the pairing slumped later in the day.
According to MUFG’s currency strategist, Lee Hardman:
‘The Pound staged a knee-jerk relief rally, as there had been some expectations that the BoE could extend quantitative easing.
‘But the BoE is likely to extend asset purchases, so that’s why there’s been only a short-term boost for the Pound today.’
Added to this, coronavirus and the fact the UK has been slower than other countries to announce plans to re-open the economy also weighed on GBP.
Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted as BoE Hold Off on Further Stimulus
The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat this morning, leaving the pairing trading at around CA$1.7432.
The Pound edged higher this morning after the Bank of England (BoE) left interest rates unchanged and held off on further stimulus.
Interest rates remained at the bank’s all-time low of 0.1%.
The central bank held off on providing the economy with further stimulus. However, two of the BoE’s nine policymakers voted in favour of increasing its bond-buying programme.
Added to this, the bank also noted that it was ready to take more action to help the economy which is set to face its largest economic slump in over 300 years.
During the meeting, the bank said the country’s GDP may decline by at least 14% this year. However, they noted that after this ‘temporary’ fall, the pickup in the economy could be ‘relatively rapid’.
The bounce-back in 2021 is estimated to be around 15% and would require significant monetary and fiscal stimulus.
BoE Governor, Andrew Bailey noted:
‘However the economic outlook evolves, the Bank will act as necessary to deliver the monetary and financial stability that are essential for long-term prosperity and meet the needs of the people of this country. This is our total and unwavering commitment.’
Canadian Dollar (CAD) Left Flat as China’s Crude Imports Rebound
Meanwhile, the Canadian Dollar remained under pressure on Thursday despite data showing China’s crude imports rebounded.
However, markets were cautious and expect gains to be capped by the glut in supplies as the coronavirus crisis weighs on global fuel demand.
Both Brent crude LCOc1 and US West Texas Intermediate futures CLc1 gained today. Although both contracts traded in and out of negative territory during the Asian session.
Prices were able to edge higher as Chinese crude imports rose last month. Prices increased from March’s 9.68 million barrels per day (bpd) to 10.42 million bpd.
According to OANDA’s senior market analyst, Edward Moya:
‘Oil prices should eventually settle on a wide $10 range, with WTI crude’s upper boundary being around the $30 a barrel level, while Brent crude targets the $35 a barrel level.’
However, the oil-sensitive ‘Loonie’ remained under pressure as there were signs that some oil producers were struggling to comply with OPEC’s agreement to cut oil output.
Pound Canadian Dollar Outlook: Will Weak Consumer Confidence Weigh on GBP?
Looking ahead to this afternoon, the Canadian Dollar (CAD) could extent its losses against the Pound (GBP) following the release of PMI data.
If April’s Ivey PMI plummets further than expected, it will dampen sentiment in the ‘Loonie’.
Meanwhile, Sterling could also be left under pressure overnight following the release of UK consumer confidence data.
If consumer confidence plummets further than expected as coronavirus lockdowns gripped the UK’s economy, the Pound Canadian Dollar (GBP/CAD) exchange rate will remain largely flat.