Growing anticipation ahead of the US presidential election and Bank of England (BoE) policy meeting left the GBP/CAD exchange rate on a weaker footing.
Last Week: Canadian Dollar Slides as BOC Rules out Rate Hike Until 2023
Support for the Canadian Dollar weakened in the wake of the Bank of Canada’s (BOC) October policy meeting, as policymakers indicated that an interest rate hike may not come until 2023.
With the BOC looking set to keep monetary policy loose for the foreseeable future CAD exchange rates were exposed to a fresh bout of selling pressure, especially in the face of a softer oil market.
However, after Boris Johnson announced that the UK would return to a state of lockdown this week the GBP/CAD exchange rate experienced a sharp slump.
Growing anxiety over the outlook of the UK economy weighed heavily on the Pound, with the economy looking set to lose further momentum in the final quarter of the year.
Three Things to Watch out for This Week
1. Canada Balance of Trade
With forecasts pointing towards a widening of the Canadian trade deficit the mood towards the Canadian Dollar seems likely to sour on Wednesday.
Weaker trade conditions would add to existing uncertainty over the strength of the economic outlook, stoking doubts over the likelihood of any imminent growth recovery.
2. Bank of England Rate Decision
In the wake of Johnson’s lockdown announcement investors are keen to gauge the outlook of Bank of England policymakers.
If the BoE opts to expand its quantitative easing programme on Thursday the GBP/CAD exchange rate could weaken, particularly if policymakers make any mention of negative interest rates.
3. Canada Unemployment Rate
The Canadian Dollar may also find a rallying point ahead of the weekend provided that October’s unemployment rate shows an improvement.
A dip from 9% to 8.8% could encourage some renewed confidence in the outlook of the Canadian labour market, temporarily easing anxiety over the impact of the ongoing Covid-19 crisis.
If the BoE delivers a dovish message on Thursday the GBP/CAD exchange rate looks set to extend its losses, especially if the Canadian economy can demonstrate signs of increased resilience.