Pound Canadian Dollar Exchange Rate Surges amid Further UK Budget U-Turn Rumours
(Updated 15.20, 13/10/22) The Pound Canadian Dollar (GBP/CAD) exchange rate rocketed upwards this afternoon as the UK government were rumoured to be having ‘active’ discussions about further mini budget reversals.
At the time of writing, GBP/CAD is trading at CA$1.5582, up 1.5% from this morning’s opening rate.
Rumours’ began to circulate that the UK government was considering further mini budget back pedalling this afternoon, which saw the Pound soar within financial markets.
A former cabinet minister tells me: “Brace for the mother of all U-Turns on the mini budget today. A friendly person in the know is advising us to steer clear of the media today to avoid the explosion. We wouldn’t want to look silly by tomorrow.” #waitandsee
— Nicholas Watt (@nicholaswatt) October 13, 2022
All this comes as Kwarteng met with the heads of the International Monetary Fund (IMF) today, in an attempt to reassure them the mini budget would prompt growth.
The speculation of scrapping tax cuts has brought relief to investors, who have been uncertain of Chancellor Kwasi Kwarteng’s budget. These uncertainties have been underpinned by the UK’s bleak economic and energy crises.
Looking ahead, this news will likely remain the focus on Thursday’s trade. If Truss makes any indication of making further cuts to the budget, then the Pound could continue to climb. However, if Truss and Kwarteng remain steadfast in their plans, which they’ve indicated they’re likely to do, then Sterling could plummet.
Original article continued below:
Pound Canadian Dollar Exchange Rate Sluggish as UK Government Pressured to Reverse Mini Budget
The Pound Canadian Dollar (GBP/CAD) exchange rate is trading sideways today as Chancellor Kwasi Kwarteng meets with the International Monetary Fund (IMF) in Washington.
At the time of writing the GBP/CAD exchange rate is trading around CA$1.5300, which is roughly down 0.2% from this morning’s opening rate.
Pound (GBP) Muted as Kwarteng is Pressured to Reverse Mini Budget
The Pound (GBP) is largely directionless this morning as UK Chancellor Kwasi Kwarteng prepares to meet with world leaders at the IMF conference in Washington.
This meeting comes after Kwarteng’s mini budget of unfunded tax cuts triggered considerable volatility in the Pound and lead to sharp increases in mortgage rates and government borrowing costs. Many economists believe the mini budget is unsustainable and there is pressure on Kwarteng to reverse course.
The IMF has previously been critical of his proposals, and he could receive a frosty reception in Washington today.
Adding further pressure to the Pound is the possibility of energy shortages this winter.
Jonathan Brearley, the CEO of Ofgem is due to speak later today and according to the Financial Times he’s expected to say that cutting down on energy consumption is:
‘[N]ot only the most direct way of reducing our bills [but] it directly helps with security of supply, contributes to decarbonisation, and saves money for the public finances’.
Canadian Dollar (CAD) Muted Following Recent Oil Price Slump
The Canadian Dollar (CAD) is also struggling to find support today. This is because there is a weakening demand for oil.
At the time of writing, WTI crude oil is trading around $88 per barrel. This comes after the crude oil lost about 6% of its value over the last few days.
This drop in oil prices comes after the Organization of the Petroleum Exporting Countries (OPEC) slashed global demand forecasts on Wednesday, citing higher inflation, stalling economic growth and Chinese lockdowns for the downgrade.
In a recent report OPEC said:
‘The world economy has entered into a time of heightened uncertainty and rising challenges, amid ongoing high inflation levels, monetary tightening by major central banks, high sovereign debt levels in many regions as well as ongoing supply issues’.
Pound Canadian Dollar Exchange Rate Forecast: GBP to be Dented by Headlines?
Looking ahead, in the absence of any notable data movement in the Pound Canadian Dollar exchange rate is likely to remain tied to UK fiscal and political developments.
Kwarteng’s meeting with IMF may be of particular note. If he remains resolute in his commitment to his tax cut plans Sterling could weaken.
Meanwhile pressure on Liz Truss at home may stoke UK political uncertainty and further limit the appeal of the Pound.
Looking at the Canadian Dollar, a lack of impactful data could see the ‘Loonie’ susceptible to changes within the oil markets. A continued decline in crude price is likely to weaken CAD exchange rates.