Pound Canadian Dollar Exchange Rate Strengthens in Spite of UK Housing Market Slowdown
The Pound Canadian Dollar (GBP/CAD) exchange rate is climbing despite concerns that the UK housing market is showing signs of slowing.
At the time of writing the GBP/CAD exchange rate is trading around CA$1.5391, is up roughly 0.3% from this morning’s opening rate.
Pound (GBP) Firms Despite UK House Price Fall
The Pound (GBP) is up against most of its peers this morning, despite signs that the UK housing market is straining under the pressure of Chancellor Kwasi Kwarteng’s mini budget.
Amongst the fallout of the mini budget is a sharp rise in mortgage rates, with the average two-to-five-year mortgage having risen to 6% in the last week. There are already signs this may be taking the wind out of the UK’s housing market, as data shows house prices started to fall in September.
Martin Beck, chief economic advisor to the EY ITEM Club said this morning:
‘Weakness in prices in September is likely to be a sign of things to come, reflecting cost of living pressures and the recent rise in market interest rate expectations and mortgage rates.’
Kwarteng met with leaders of Highstreet banks to offer support to the housing market. As a result, Kwarteng is now considering extending the government’s mortgage guarantee, which would protect lenders in the event of housing repossession.
Despite the uncertainty about mortgage rates, Sterling’s recent losses appear to be making it an attract proposition to more price conscious investors this morning, pushing the GBP/CAD exchange rate higher.
Canadian Dollar (CAD) Mixed as Risk Aversion Undercuts Oils Prices
The Canadian Dollar (CAD) is also struggling to find support this morning as CAD investors shrug off the recent spike in oil prices.
The Organization of the Petroleum Exporting Countries (OPEC) cut oil barrel production by 2 million barrels per day earlier this week pushing crude prices sharply higher. At the time of writing WTI crude oil was trading at $88 per barrel.
This downturn in CAD exchange rates may be linked to a repricing of expectations for future interest rate hikes from the Bank of Canada (BoC) with investors predicting the bank will fall behind the curve when compared with the Federal Reserve.
Pound Canadian Exchange Rate Forecast: To Firm on BoE Comments?
Later today, the GBP/CAD exchange rate could continue to see significant movement if investors focus on the Bank of England (BoE) speech today.
In lieu of further data today investors will likely turn their attention towards Dave Ramsden’s speech. If he strikes a hawkish tone then the Pound could continue to strengthen.
Looking at the Canadian Dollar, investors will likely trade on the unemployment data, which is expected to remain unchanged at 5.4%. However, if the data prints an unexpected rise as it did in August, this could signal a weakening economy and weigh on the ‘Loonie’.