Following a better-than-forecast Canadian unemployment rate posting, the GBP CAD exchange rate has fallen to 1.6475.
With prior Bank of England (BoE) pessimism still weighing on the Pound, the pairing rate was dragged down when Canadian unemployment fell from 6.5% to 6.3% in July.
The Canadian trade deficit expanded on Friday’s trading session, but economists were more focused on the fact that unemployment was at its lowest level since October 2008.
(First published 11:53, August 3rd, 2017)
The Pound has recently dropped against the Canadian Dollar, following August’s Bank of England (BoE) policy meeting. Looking ahead, it seems that a significant change of stance is needed to push the GBP CAD exchange rate up again.
BoE in Focus for Future GBP CAD Exchange Rate Movement
In the aftermath of the latest BoC interest rate freeze, the Pound dropped by -0.3% against the Canadian Dollar.
This weakness stemmed from an all-around disappointing spread of BoE forecasts. Wage growth is now forecast to post 3% in 2018 compared to a prior 3.5%, while economic growth predictions have also been downgraded.
In 2017, the UK economy is expected to grow by 1.7% instead of 1.9%, while 2018’s estimate has seen a similar revision from 1.7% to 1.6%.
In spite of all this gloom, however, a Pound recovery is not impossible if there is a substantial change in the UK economy.
Giving his say on the matter has been Legal and General Mortgage Club Director Jeremy Duncombe;
‘It’s been a year since the BoE’s decision to lower [interest] rates to [0.25%] and during that time, despite uncertainty, the mortgage market has remained buoyant, quickly adapting to the challenges of Brexit and the UK general election result. However, these historic lows won’t last forever, particularly as inflation starts to creep upwards. A base rate rise this year, whilst not a certainty, is possible’.
There are three BoE interest rate decisions left this year, so an interest rate hike remains possible, if currently improbable.
Continued Oil Price Rise Necessary to Solidify CAD Gains
For the Canadian Dollar, future increases in value will largely be dependent on how the price of crude oil changes in the coming weeks.
The price of crude, a key commodity for Canada, rose steadily up to $50 per barrel at the end of July, having started to rise earlier in the month.
Since breaching this barrier, however, the cost has dropped down closer to $49 per barrel.
If the Canadian Dollar is to make steady, consistent gains against the Pound in the near-term then another repeat of steady oil price rises seems a necessary prerequisite.
Recent Interbank GBP CAD Exchange Rates
At the time of writing, the Pound to Canadian Dollar (GBP CAD) exchange rate was trading at 1.6575 and the Canadian Dollar to Pound (CAD GBP) exchange rate was trading at 0.6028.
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