Comments from Bank of England (BoE) policymaker Dave Ramsden helped to prompt a surge for the GBP/CAD exchange rate as he talked down the possibility of negative interest rates.
Last Week: Disappointment over UK Government’s Wage Subsidy Plan Limits Pound Appeal
This tempered the impact of comments made by fellow policymaker Silvana Tenreyro over the weekend, where she expressed some optimism over the possible impact of negative rates.
Even so, Chancellor Rishi Sunak’s Winter Economy Plan failed to impress investors, with the announced wage subsidy programme falling far short of the furlough scheme.
As markets see significant risk of a fresh wave of job losses in the final months of the year GBP exchange rates still look vulnerable to selling pressure.
While the Canadian budget deficit narrowed further than forecast in July this was not enough to keep the Canadian Dollar on a stronger footing against its rivals, meanwhile.
Three Things to Watch out for This Week
1. UK Gross Domestic Product
Confidence in the underlying health of the UK economy could take a fresh blow on Wednesday if the finalised second quarter gross domestic product report disappoints.
Confirmation that the economy experienced a -20.4% contraction on the quarter would limit the upside potential of the Pound, especially if the accompanying report shows any fresh signs of weakness.
2. Canada Gross Domestic Product
The mood towards the Canadian Dollar could pick up on the back of July’s monthly Canadian growth rate, meanwhile.
With forecasts pointing towards another solid monthly growth rate of 3%, this evidence of the Canadian economy bouncing back from the impact of the pandemic may give CAD exchange rates a boost.
3. UK Manufacturing PMI
While no change is forecast from September’s initial manufacturing PMI reading this may still put pressure on the Pound.
As long as signs point towards the manufacturing sector struggling to maintain its initial bout of recovery momentum worries over the economic outlook seem set to weigh on GBP exchange rates.
If updated GDP and PMI results point towards weakness within the UK economy the GBP/CAD exchange rate looks set to return to a downtrend in the days ahead.