Pound Canadian Dollar Exchange Rate Gains Limited with BoC in Focus
Persistent optimism about Britain’s economy caused the Pound Canadian Dollar (GBP/CAD) exchange rate to advance this morning. However, gains were limited as markets turned attention to the Bank of Canada’s (BoC) March policy decision.
The Canadian Dollar (CAD) was broadly appealing last week. GBP/CAD tumbled from the interbank level of 1.77 and shed over two cents to close the week around the level of 1.75.
This week’s movement has been narrower but the Pound’s (GBP) advances have been limited. At the time of writing, GBP/CAD trends less than half a cent above the week’s opening levels, still in the interbank region of 1.75.
The Bank of Canada left monetary policy frozen as expected. The bank’s tone was fairly optimistic, leaving investors looking ahead to Friday’s slew of key UK and Canadian data.
Pound (GBP) Exchange Rate Rally Falters on UK-EU Tensions
The Pound has been rallying strongly in recent weeks, and the British currency remains appealing overall today. Optimism that Britain’s economy could recover from the coronavirus pandemic before other major economies do has been driving Sterling strength.
However, the Pound’s bullishness was a little softer today. Investors were hesitant to keep piling into the British currency amid a lack of fresh support in the UK outlook, as well as some fresh uncertainty.
UK-EU tensions have been flaring up again due to difficulties in post-Brexit trade, as well as disagreement between UK and EU officials over comments on coronavirus vaccines.
European Council President Charles Michel said that the UK was banning exports on vaccines, but a UK spokesperson said these claims were untrue.
Canadian Dollar (CAD) Exchange Rates Focused on Bank of Canada (BoC) Decision
The Bank of Canada (BoC) held its March policy decision today. It follows a period of strength in the Canadian Dollar.
The Canadian Dollar has surged due to higher global economic recovery hopes, which have also boosted prices of commodities. As oil is Canada’s biggest export, higher oil prices on this commodity boost only further supported CAD strength.
However the Canadian Dollar’s appeal softened ahead of today’s BoC policy decision. This was due to speculation that the bank may be hesitant to show much optimism or hawkishness.
Ultimately, the bank left monetary policy frozen as expected and was cautiously optimistic, noting that the economy was more resilient than expected. According to the BoC statement:
‘We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s January projection, this does not happen until into 2023.’
The Canadian Dollar was a little stronger after the decision.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Investors Await Friday’s Slew of Stats
Markets are likely to continue to digest the Bank of Canada’s (BoC) policy decision over the coming day or so. For now, this as well as shifts in commodity sentiment and oil prices will drive the Canadian Dollar’s movement.
The Pound will likely remain generally appealing due to continued optimism over Britain’s coronavirus recovery outlook.
However, there could be another shift in GBP/CAD movement depending on how Friday’s UK and Canadian data unfolds.
Most of the week’s most influential ecostats are due on Friday, and any surprises could influence the Pound to Canadian Dollar exchange rate outlook.
UK trade balance, manufacturing and industrial production, and growth rate data from January will be published. The data will give markets a better idea over how Britain’s economy performed as the nation headed back into lockdown.
Canada’s February job market report and January wholesale sales stats will be published as well. Stronger than expected Canadian data could boost hopes about Canada’s own economic recovery.
Overall, there is plenty in the coming sessions that could influence the Pound Canadian Dollar (GBP/CAD) exchange rate outlook.