(Updated 16:50 26/01/22)
The Pound Canadian Dollar (GBP/CAD) has regained some of its earlier losses to rest close to its opening position following the Bank of Canada’s (BoC) decision to leave interest rates unchanged.
At time of writing the GBP/CAD exchange rate is at around $1.7029, virtually unchanged from this morning’s opening figures.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Slides as Investors Await BoC Meeting
The Pound Canadian Dollar (GBP/CAD) exchange rate has fallen today as the ’Loonie’ climbs ahead of the Bank of Canada’s (BoC) interest rate decision.
At time of writing the GBP/CAD exchange rate is at around $1.6976, which is down roughly -0.4% from this morning’s opening figures.
Canadian Dollar (CAD) Soars ahead of BoC Interest Rate Decision
The Canadian Dollar (CAD) is up against its rivals today ahead of an interest rate decision by the Bank of Canada (BoC) on Wednesday afternoon. Strong oil prices have also helped support CAD in its upward movement.
Financial markets and analysts are now divided on whether the BoC will raise interest rates on Wednesday.
The central bank has previously stated that they are ‘not comfortable’ with the current path of inflation after the country’s rate of inflation hit its highest point since September 1991 in December. Consumer prices have also continued to climb at their fastest pace in 30 years. A rate hike could shock investors and see CAD soar.
Analysts at TD Securities had the following assessment of the chances of a rate hike:
‘There is a huge amount of uncertainty around the January Bank of Canada rate announcement, as policymakers attempt to balance very strong realized data on employment and inflation from Q4 versus the sharp increase in COVID infections and subsequent lockdowns in late December and January. Ultimately, we think it makes more sense for the BoC to lift rates.’
The commodity-tied ‘Loonie’ has also been supported in its climb by an ongoing climb in oil prices. Increasing tensions at the Ukraine-Russia border have added supply concerns to an already tight market for crude, pushing the commodity’s price higher.
Pound (GBP) Dips as Party Allegations Continue to Undermine PM Johnson
The Pound (GBP) dipped against many of its rivals today as ongoing domestic political uncertainty continues to plague Sterling. Losses for the currency may have been limited however by expectations of an interest rate hike by the Bank of England (BoE).
Pressure has continued to be heaped on the Pound as the ‘Partygate’ scandal continues to rock confidence in Prime Minister Boris Johnson.
The publication of an internal inquiry into the allegations of illegal gatherings at 10 Downing Street is rumoured to be published as soon as Wednesday. A potential leadership challenge is likely to push Sterling further down.
The announcement on Tuesday of an official investigation by the Metropolitan Police into the allegations is also sure to have rocked confidence in the Pound.
Losses for GBP may be capped by expectations of an interest rate hike by the BoE however. Markets have priced in a rate hike at the central bank’s 3 February meeting as all but certain, particularly as UK inflation jumped to its highest point since March 1992 in December.
GBP/CAD Forecast: Will BoC Raise Interest Rates to Combat Inflation?
Looking to the rest of the week, GBP could see a boost on Thursday should distributive trades figures rise as forecast. The UK’s retail sector is set to recover this month following the easing of the country’s ‘Plan B’ restrictions.
Ongoing developments in the ‘Partygate’ scandal are also likely to affect Sterling this week, with a potential leadership likely to undermine confidence in the currency.
CAD investors will be eagerly awaiting the BoC’s interest rate decision and monetary policy report on Wednesday. The Canadian Dollar is also likely to climb alongside the price of crude oil this week.