The Pound has seen a 0.3% rise against the Canadian Dollar today, owing to current optimism about the government’s Brexit-handling abilities.
The Canadian Dollar has conversely declined due to trader uncertainty about future Bank of Canada (BOC) monetary policy.
Pound could Lose Ground on Worsening Brexit Conditions
Based on last week’s Pound crash, the state of Brexit negotiations may prove a highly influential factor in the future GBP/CAD exchange rate.
The Pound previously dived when the Bank of England (BoE) suggested that there might not be any further interest rate hikes for the foreseeable future.
The situation was worsened when BoE Governor Mark Carney suggested that future policy decisions might be dependent on the Brexit process.
Specifically, the deciding factor was whether the UK was likely to get a ‘Soft Brexit’ deal with a transition and single market access, or a ‘Hard Brexit’.
The latter possibility could see the UK leave the EU without a trade deal, raising the risk of a prolonged BoE rate freeze or even another rate cut down to 0.25%.
Bank of Canada (BOC) Governor’s Speech could Trigger CAD/GBP Advance
The Canadian Dollar rallied against the Pound at the end of the previous week, but once again finds itself declining in the pairing.
This comes despite even higher crude oil prices; the weakness may instead be down to uncertainty about the Bank of Canada (BOC).
BOC Governor Stephen Poloz is set to speak at an event in Montreal on Tuesday and will touch on ‘Central Banks’ Ability to Understand Inflation’.
Poloz previously declared that every BOC policy meeting should be seen as a ‘live’ one, adding that;
‘There is no predetermined path for interest rates from here. Monetary policy will be particularly data dependent in these circumstances and, as always, we could still be surprised in either direction’.
This suggests that there is an equal chance of a BOC interest rate hike, freeze or cut on each policy meeting, which only increases CAD volatility.
If Poloz uses his Montreal meeting to drop some hints about the next interest rate decision, the Canadian Dollar may be affected.
Any suggestion that the BOC is considering another rate hike after the two already seen in 2017 could lead to a CAD/GBP advance.
Recent Interbank GBP CAD Exchange Rates
At the time of writing, the Pound to Canadian Dollar (GBP CAD) exchange rate was trading at 1.6713 and the Canadian Dollar to Pound (CAD GBP) exchange rate was trading at 0.5978.
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