What’s Been Happening: Pound Canadian Dollar Plummets Following BoC Rate Hike
At the beginning of the week, the Pound (GBP) came under pressure amid warnings that rising costs could harm small businesses. The Federation of Small Businesses (FSB) warned nearly 500,000 UK small businesses could be ‘at risk of going bust within weeks’.
Meanwhile, the commodity-linked Canadian Dollar was bolstered by strong oil prices.
On Tuesday, GBP exchange rates were undermined by the Bank of England’s (BoE) latest lending data: in April, mortgage approvals fell whilst consumer credit increased, surprising markets.
At the same time, the ‘Loonie’ continued to gain traction in spite of mixed GDP data. In March, Canada’s GDP overshot expectations, however both April’s preliminary release and the first-quarter GDP growth rate missed market forecasts.
Midweek, the Canadian Dollar soared as the BoC raised interest rates for the third consecutive time, hiking to 1.5% as expected. Some hawkish forward guidance helped to prop up CAD exchange rates through the rest of the week as the bank signalled it will continue to hike rates.
Meanwhile, thin trading conditions due to the extended UK bank holiday left the Pound vulnerable to further losses through the second half of the week.
Three Things to Watch Out for This Week
- Canada’s Unemployment Rate
A key focus for CAD investors this week will be Canada’s latest jobs report. Will another drop in unemployment last month help to push the ‘Loonie’ higher?
- Canada’s Trade Balance
In April, Canada’s trade surplus is expected to increase from CA$2.49bn to CA$2.9bn, potentially supporting CAD exchange rates.
- UK Politics
The Pound may face further volatility this week as Monday’s vote of no confidence failed to ease UK political uncertainty.
Pound Canadian Dollar Forecast
Looking ahead, the Pound Canadian Dollar exchange rate may be impacted by Canada’s latest unemployment figures: will a low jobless rate bolster demand for the ‘Loonie’?