Pound Canadian Dollar Exchange Rate Weakens as UK Government Debt Outlook Drops
The Pound Canadian Dollar (GBP/CAD) exchange rate is falling this morning as the Fitch Agency sets to downgrade the UK’s crediting rating from stable to negative.
At the time of writing the GBP/CAD exchange rate is trading around CA$1.5408, which is roughly down 0.2% from this morning’s opening rate.
Pound (GBP) Falls as Fitch Downgrades UK Credit Outlook to ‘Negative’
The Pound (GBP) is falling against the majority of its peers this morning amid the threat that the UK’s credit rating could be downgraded.
Fitch has joined S&P in lowering its outlook for the UK’s AA- investment grade credit rating, from stable to negative.
This comes in the wake of the release of the mini-budget a couple of weeks ago which consisted of £45bn of unfunded tax cuts. This budget combined with a lack of a mid-term fiscal forecast sent the markets into chaos.
In a statement released this morning Fitch said:
‘The large and unfunded fiscal package announced as part of the new government’s growth plan could lead to a significant increase in fiscal deficits over the medium term’.
The clash the mini budget had with the Bank of England’s (BoE) monetary tightening also contributed to the downgrade. Fitch said that the governments undermining of the BoE’s interest rate rises dented confidence and credibility.
Canadian Dollar (CAD) on the Back Foot amid OPEC Decision
The Canadian Dollar (CAD) is up against GBP but is struggling to find support elsewhere this morning as investors adjust to the Organization of the Petroleum Exporting Countries (OPEC) cut in oil production against a backdrop of risk-off trade.
The oil cartel, who met on Wednesday, agreed to cut their barrel per day quota down by 2 million. The crude oil market has been able to maintain their gains from this week, trading at $87 per barrel at the time of writing.
However, CAD is struggling this morning as risk aversion is limiting its movement. This in part can be attributed to the concern of rising oil prices when many countries are nearing recession.
Jake Sullivan, the US National Security Adviser and Brian Deese, the US director of the National Economic Council, said the decision:
‘Will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices’.
Pound Canadian Exchange Rate Forecast: GBP to Fall Further amid Mortgage Rate Discussion?
Later today, the Pound Canadian Dollar exchange rate could face an uphill battled as GBP investors continue to trade on domestic headlines.
A lack of data today means UK investors will keep an eye on mini-budget developments. Chancellor Kwasi Kwarteng is due to start crisis talks with highstreet banks in relation to soaring mortgage rates. A positive discussion about lowering rates could cheer investors. Although, if the talks don’t lead anywhere then investors could lose confidence and the Pound could slip further.
Looking to Canada, the Ivey PMI is due to print later today. It is forecast to print 55, which is a drop from 60.9. If true this will show a slowing of growth, which could weigh on CAD.