(Updated 16:50 16/12/21)
The Pound Canadian Dollar (GBP/CAD) has traded within a narrow range following its earlier rise as the Bank of England (BoE) announced they would be raising interest rates to 0.25%.
At time of writing the GBP/CAD exchange rate is at around $1.7018.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Climbs Following BoE Interest Rate Decision
The Pound Canadian Dollar (GBP/CAD) Exchange Rate jumped earlier following the Bank of England’s decision to raise interest rates, although a strong Canadian Dollar prevented the pair from reaching any dramatic highs.
At time of writing the GBP/CAD exchange rate is at around $1.7051, which is up 0.2% from this morning’s figures.
Pound (GBP) Rockets as BoE Raises Interest Rate
The Pound soared today following the Bank of England’s surprise decision to raise interest rates to 0.25%. Members of the central bank’s monetary policy committee (MPC) voted 8-1 in favour of raising rates as UK domestic inflation leaped to a decade high of 5.1% in November.
The decision shocked investors and prompted mass buying of Sterling, as both analysts and BoE board members had previously signalled that a rate rise was unlikely due to the emergence of the Omicron variant. BoE Governor Andrew Bailey said that the central bank ‘had to act’ in order to combat what they saw as medium-term inflationary pressures. The move makes them the first of the major central banks to raise interest rates.
The BoE is however facing renewed criticism over its communications to investors. Victoria Scholar, head of investment at interactive investor, echoed the frustration felt by many traders:
‘It was only a fortnight ago that Bank of England hawk Michael Saunders, who was one of just two MPC members to back a hike in November, suggested even he might pause on voting for a rate hike this month in light of the threat of Omicron. However today, many traders have been caught off guard with the unexpected hike, sending the Pound and the FTSE 100 sharply higher.
‘There is a growing sense of frustration among traders and investors around the mixed messaging from the central bank, prompting many to label Andrew Bailey as the second unreliable boyfriend.’
The BoE also cut its growth forecasts for December and 2022. This follows growth hitting a ten month low across the UK’s private sectors, particularly in the services sector where hospitality and travel firms have felt the impact of the UK’s ‘Plan B’ restrictions most keenly.
Canadian Dollar (CAD) Climbs as Oil Prices Continue to Rise
The Canadian Dollar has risen against many of its rivals today, as it was buoyed by higher oil prices .
Upward movement of the commodity-tied ‘Loonie’ could well continue to be underpinned by the rising price of crude oil as it hit $75 per barrel today.
A hawkish outlook from the US Federal Reserve following their last policy meeting as well as diminishing supplies are thought to be behind the rise.
GBP/CAD Exchange Rate Forecast: Will UK’s Retail Sales Support BoE Decision?
Tomorrow brings the release of the UK’s latest retail sales figures which are currently forecast to report sales growth remained unchanged at 0.8% in November.
Whilst this would mark the third consecutive month of growth, businesses were hoping figures would be higher due to early Christmas shopping. Should investors see this an indicator of waning consumer confidence then the Pound could slip.
With no significant data for the Canadian Dollar this week, it’s likely that CAD will continue to be affected by oil prices and the movements of the major central banks.