Pound Canadian Dollar Exchange Rate Flat Ahead of ‘Austerity’ Budget
The Pound Canadian Dollar (GBP/CAD) exchange rate is rangebound this morning as Chancellor Jeremy Hunt prepares to deliver his Autumn Statement.
At the time of writing the GBP/CAD exchange rate is trading around CA$1.5917, which is virtually unchanged from this morning’s opening rate.
Pound (GBP) Subdued as Markets Brace for Autumn Statement
The Pound (GBP) is muted against the Canadian Dollar (CAD) this morning, ahead of the UK government’s much-anticipated Autumn Statement.
Whilst tax rises and borrowing cuts are expected in the budget, Hunt will reportedly also pledge to rise benefits and pensions in line with inflation. However, it’s clear there are reservations about the statement which are capping the Pound.
The budget comes hot on the heels of yesterday’s consumer price index. October’s release reported domestic Inflation surged from 10.1% to a 40-year high of 11.1%. The latest surge has revived fears over the cost-of-living crisis and its impact their spending power. Particularly as Hunt is expected to slash public spending.
Mohamed El-Erian, Chief Economic Adviser at Allianz said this austerity plan could be ‘excessive.’ Public spending will allegedly be cut by £30bn, whilst tax rises are said to bring in an extra £24bn.
El-Erian went on to say:
‘It is going to be very tricky, striking the right balance…At the end of the day, the answer to all the issues that the UK faces today, from inflation to low growth to a damaged economic reputation is high, sustained, inclusive growth.’
If Hunt’s austerity measures are seen as going too far and undermining growth the Pound is likely to fall.
Canadian Dollar (CAD) Struggles amid Oil Price Drop
Meanwhile the Canadian Dollar is lacking support this morning following a drop in oil prices.
At the time of writing, WTI crude oil is trading around $84.87, slipping amid concerns over weakening demand.
Economists at JP Morgan predict rapidly rising interest rates might push the US into a ‘mild recession’ next year. This combined with Covid cases rising in China has caused tension in the oil markets, which is weighing on CAD.
Supply concerns are also dragging on the oil-linked ‘Lonnie’. The EU is expected to cut Russian crude supply as early as December, whilst demand for oil remains the same, putting strain on markets and the Canadian Dollar.
Pound Canadian Dollar Exchange Rate Forecast: To Climb on Retail Figures?
Looking ahead, the Pound Canadian exchange rate could be driven by UK retail sales data tomorrow.
Retail sales are expected to rise from -1.4% to 0.3% in October, which could help support Sterling sentiment. However, if the figures decline this could exasperate recession concerns as business continue to struggle amid the economic downturn.
In the meantime, the Pound could continue to strengthen if Hunt’s Autumn Statement is received well. However, if GBP investors believe that the budget will do more harm to the economy, Sterling could shed its early gains.
Turning to Canada, their producer price index is due tomorrow. Price inflation is expected to rise by 0.4%. If true, this could lift CAD as it indicates that inflation might not have peaked, which could incentivise the Bank of Canada (BoC) to keep rising interest rates.