Pound Canadian Dollar (GBP/CAD) Exchange Rate Firms, Central Banks in Focus
The Pound Canadian Dollar (GBP/CAD) exchange rate peaked at a 2-month high today, hitting levels not seen since 4 May. Driving the uptrend may have been cautious trading from Canadian Dollar (CAD) investors ahead of June’s employment data.
At the time of writing, GBP/CAD is trading at C$1.7013, having since relinquished a portion of today’s gains.
Canadian Dollar (CAD) Pressured by Rising Unemployment
The Canadian Dollar faces mixed trading stimuli this afternoon following the release of a higher-than-expected unemployment reading for the month of June. Countering headwinds, the economy added more jobs than forecast, while last month’s participation rate exceeded estimates at 65.7%.
The data suggests that the pressure individuals and businesses face from inflation may be fading – positive news in itself, but possibly detrimental to the case for another interest rate hike from the Bank of Canada (BoC). Declining wage growth further suggests that heightened consumer expenses are no longer driving up earnings.
On the other hand, strong jobs data is a sign of economic resilience and implies that an interest rate hike from the BoC could be weathered. Furthermore, an increase in people looking for work shows that the effects of inflation have not entirely subsided.
According to analysts at Scotiabank, ‘Strong data should bolster the case for another rate hike from the BoC, though perhaps not as soon as next week, and give the CAD a lift.’
As investors mull over today’s release, CAD exchange rates face uncertain movement.
Pound (GBP) Supported by Bullish Market Momentum
The Pound (GBP) enjoyed a boost today in spite of multiple headwinds – including persistent inflation, uncertainty regarding the Bank of England (BoE)’s next steps, and fears of a recession.
Inflationary pressures in the UK remain more stubborn than in a number of other countries, in part due to labour shortages following Brexit. To bring price pressures under control, the UK’s central bank has been forced to raise interest rates to levels which are subsequently impacting house sales and nationwide manufacturing activity.
The general response to the BoE’s rapid rate hike trajectory has been mixed: while many economists acknowledge that an aggressive monetary policy strategy is necessary, others question why UK consumers are paying higher prices without seeing a corresponding return on their savings.
On Monday, Lawmakers on the influential Treasury Select Committee accused high-street banks of ‘profiteering’; the committee’s chair Harriett Baldwin said it was ‘time to see an acceleration in progress’, and that she would ‘be particularly alert to any apparent foot dragging’.
Despite tensions in the banking sector and cost-of-living concerns, however, a risk-on mood propelled Sterling higher against its peers. Furthermore, the potential for further interest rate hikes inspired optimism among GBP traders.
GBP/CAD Exchange Rate Forecast: Ivey PMI to Trigger Further Movement?
The Pound Canadian Dollar exchange rate could enjoy additional gains this afternoon if Canada’s Ivey PMI for June prints below May’s reading as expected.
While economic activity in Canada is forecast to have increased at a slower pace last month, however, June’s surprise surge in job creation may have lent the country’s economy a boost. An unexpected uptick could buoy the ‘Loonie’ against its peers, capping gains for GBP/CAD.
Into next week, the BoC is predicted to hike interest rates by 25bps. If the rate hike goes ahead as forecast, the Canadian Dollar may climb further still.