Canadian Dollar Gains 1% on Pound Sterling Following Rate Decision
The Bank of Canada (BOC) has left the benchmark interest rate at 0.50% today, despite yesterday’s poor GDP figures sparking concerns that a cut could be on the horizon. In a statement, the BOC claimed that the GDP could be accommodated by the current monetary policy and highlighted the fact that economic growth has continued to be roughly in line with its estimates.
Earlier…
The Canadian Dollar (CAD) has plummeted against the major currencies following the release of surprising GDP figures which suggest a greater deceleration in growth than experts predicted. The GBP/CAD exchange rate is up 0.2%, although a slowdown in manufacturing has prevented Pound Sterling (GBP) from making more significant gains.
GBP/CAD Exchange Rate Forecast: UK Manufacturing PMI Highlights SME Weakness
Weak performance by SMEs in the UK manufacturing sector has dragged the Purchasing Managers Index down from 55.2 to 52.7, according to survey compilers Markit. While the sector as a whole saw growth, most of the expansion comes from larger companies, with smaller enterprises unable to keep up.
Markit Senior Economist Rob Dobson is concerned by this disparity: ‘While the improvement in recent months is a welcome trend, scratching beneath the surface of the manufacturing numbers stills exposes a number of weaknesses. Growth remains heavily focussed on the domestic consumer, while the strong gains at large-scale producers have yet to filter through to SMEs. A broadening of the expansion is necessary if the nascent recovery is to be sustained.’
Bank of England (BoE) Governor Mark Carney has been taking questions today regarding the results of the BoE stress tests, which were passed by all seven of the UK’s major lenders. Carney has dropped less-than-subtle hints that the BoE has no plans to suddenly introduce extra capital regulations, which are likely aimed at bankers who have suggested that they could relocate their headquarters outside of the UK in order to avoid harsher regulations.
The GBP/CAD exchange rate is currently trending in the region of 2.0143.
CAD/GBP Exchange Rate News: Canadian Economy Escapes from Technical Recession
The Canadian Dollar has tumbled after the release of shock GDP figures, with the deceleration in growth for September almost double the expected pace, falling from 0.9% to 0.0% Year-on-Year (YoY), while Month-on-Month (MoM) GDP shrank by -0.5%.
While quarterly GDP increased by 2.3% this quarter, after declining in the previous two quarters, the figure for September isn’t encouraging as the fourth quarter approaches. While Canada’s economy has escaped from a technical recession, in which the economy contracts for two successive quarters, this month’s severe slowdown could impact tomorrow’s Bank of Canada (BoC) interest rate decision.
The Canadian Dollar has slumped against the major currencies and is down -0.2% against Pound Sterling, -0.6% against the Euro (EUR) and -1.0% against the Australian Dollar (AUD).
GBP/CAD Exchange Rate Forecast: GDP Could Affect Bank of Canada Interest Rate Decision
The Bank of Canada will meet to discuss interest rates tomorrow. After having cut them twice this year in response to falling oil prices, the BoC is expected to leave interest rates on hold at 0.50%, with the bank believing that the economy is on track to reach growth levels of 2.5% by 2017. It remains to be seen whether the shock GDP figure will change their outlook. The only data released for the UK tomorrow is the Markit/CIPS Construction PMI, which is expected to fall from 58.8 to 58.5.
The GBP/CAD exchange rate is currently trending between 2.0053 and 2.0183.
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