The Pound Canadian Dollar (GBP/CAD) exchange rate has marched higher this week, however the currency pairing is now stuck in a narrow range amid thin trading conditions.
At the time of writing GBP/CAD is trading at around CA$1.7216, virtually unchanged from this morning’s opening rate.
Pound (GBP) wobbles amid absence of data
The increasingly risk-sensitive Pound (GBP) is moving without a clear direction this morning amid a souring market mood.
With notable data in short supply, investors look elsewhere for fresh GBP impetus. Hawkish commentary yesterday from Bank of England (BoE) policymaker Catherine L Mann appears to be buoying the Pound amid thin trading conditions.
As one of two rate-setters to vote for an interest rate hike during January’s BoE rate decision, Mann continued to argue that sticky inflation should see rates left ‘higher for longer’.
The BoE hawk went on to say that disproportionate UK wealth serves to limit inflationary easing, stating that rich consumers who are immune to higher interest rates are not having to curtail their spending habits, thereby making it harder to curb UK inflation.
Mann commented:
‘Consumers discipline what firms can price – they can’t pay for it … or they choose not to. There is not a lot of consumer discipline on a large enough fraction of categories of services to represent active deceleration in services price inflation.’
While sticky services inflation remains a concern for some central bank officials, looming uncertainty surrounding the BoE’s next monetary move could see Mann’s words having only a limited effect on Sterling exchange rates as the session continues.
Canadian Dollar (CAD) muted ahead of GDP
Meanwhile, the Canadian Dollar (CAD) is rangebound ahead of high-impact data due this afternoon.
Economists are expecting to see a return to growth for the Canadian economy, in this afternoon’s GDP report, which could in turn provoke a shift in Bank of Canada (BoC) monetary policy expectations today.
RBC Economics forecasts:
‘We expect Q4 GDP growth to remain in positive territory with a small annualised increase of 0.5%. That will prevent the economy from seeing two consecutive quarters of contraction, which is often used as the definition of a ‘technical’ recession.’
Investor anticipation therefore leaves the ‘Loonie’ rangebound this morning, with investors reluctant to place any aggressive bets ahead of this afternoon’s market moving data.
In the meantime, a marginal dip in crude oil prices today may serve to limit the commodity-linked CAD’s upside potential ahead of this afternoon’s releases.
Pound Canadian Dollar exchange rate forecast: Canadian GDP in Focus
Looking ahead, Canadian GDP is due out this afternoon. Should the data print as expected, reporting an annualised increase of 0.5% and quarterly growth of 0.3%, signs of economic rebound in Canada could see the ‘Loonie’ strengthen against its peers as markets resize their interest rate expectations.
Looking to the UK, a speech from BoE Chief Economist Huw Pill may drive GBP movement, amid a data-light end to the week on Friday. As the central bank paints an increasingly unclear picture as to when monetary changes could come into play, any indication surrounding the timings of potential interest rate changes from Pill could spark GBP volatility.