Pound Canadian Dollar (GBP/CAD) Subdued as UK Government Announce Energy Support for Firms

Pound Canadian Dollar Exchange Rate Softens amid Concerns over Cost of Support

The Pound Canadian Dollar (GBP/CAD) exchange rate weakened despite the government announcing energy bill support for businesses.

At time of writing the GBP/CAD exchange rate is around $1.5174, falling by 0.23% from the morning’s opening levels.

Pound (GBP) Under Pressure as Government Borrows More than Expected

The Pound (GBP) is sliding against many of its rivals today as markets prepare for both the Federal Reserve and Bank of England (BoE) interest rate decisions. In the meantime, the UK government announce plans to halve energy bills for businesses.

Despite the energy bill support for UK firms, concerns over funding the fiscal aid are weighing on Sterling. Public sector borrowing was higher than expected in August, with £11bn borrowed. £2.6bn less than this time last year but still £6.5bn more than pre-Covid. With soaring inflation continually pushing up the UK deficit, investors are becoming increasingly concerned over the long-term cost of the announced financial aid.

The support for businesses is only penned for six months, compared to two years for households. Kate Nicholls, CEO of UKHospitality, has warned that businesses could be left high and dry when the measures end in March 2023. Nicholls said of the measures:

 ‘We particularly welcome its inclusiveness – from the smallest companies to the largest – all of which combine to provide a huge number of jobs, which are now much more secure.

‘The Government has recognised the vulnerability of hospitality as a sector. We will continue to work with the Government, to ensure that there is no cliff edge when these measures fall away.’

Canadian Dollar (CAD) Buoyed on Rebounding Oil Prices

The Canadian Dollar (CAD) is enjoying moderate success today as WTI crude staged a recovery after plunging yesterday.

The latest news out of Ukraine is lending moderate support to the commodity-linked ‘Loonie’. Putin made a rare TV appearance and gave a national address to Russia. Reversing the optimism around the energy crisis after Ukraine staged a series of successful counter-offensives, security fears have returned.

Announcing a partial mobilisation of military forces in Russia, Putin also gave Russia’s support to the planned referendums. With the Ukraine invasion now further away from a resolution as ever, oil prices are expected to climb. Europe’s energy crisis could be exacerbated with Putin’s latest plans, and the demand for oil could grow.

Pound Canadian Dollar Forecast: BoE Interest Rate Decision to Boost the Pound?

Looking ahead, the market will shift its attention to the Fed’s interest rate decision this evening. An expected hawkish central bank could see a 75bps rate hike, but there is a chance for a full 1% raise.

Meanwhile, the Pound could see significant movement tomorrow with the BoE’s interest rate decision. If the central bank opts for a hike of 75bps, Sterling could see a boost. But anything smaller and the Pound could sink against its rivals.

Danny Tingle

Contact Danny Tingle

Do Not Sell My Personal Information