The Pound to Canadian Dollar (GBP/CAD) exchange rate experienced minimal movement on Wednesday as the Bank of Canada acted in accordance with economists expectations.
After its latest policy meeting, the Bank of Canada announced that interest rates would remain unchanged – just as industry experts had envisaged.
Although Canada’s recent Consumer Price Index showed an unexpected increase (coming in above the BOC’s 2% target at 2.3%) domestic employment figures have been patchy and other Canadian fundamentals have proved to be a cause of concern.
Consequently, the BOC’s decision to leave the benchmark rate at 1% (where it’s been stagnating for around four years) was unsurprising.
The central bank issued the following statement with the less-than-inspiring decision; ‘The Bank is neutral with respect to the timing and direction of the next change to the policy rate, which will depend on how new information influences the outlook and assessment of risks […]The global economy is on a lower growth track than was foreseen at the time of the April Monetary Policy Report. Serial disappointment with economic performance during the past several years has mainly reflected the impact of private-sector deleveraging, fiscal consolidation and, especially, the lingering effect of uncertainty on business investment and trade. Nevertheless, the Bank continues to project that global growth will gather momentum as these headwinds abate. Given the downgrade to the global outlook, economic activity in Canada is now projected to be a little weaker than previously forecast.’
In reference to the Canadian Dollar’s exchange rate (which some industry experts have deemed overvalued) the BOC added; ‘the Bank still expects that the lower Canadian dollar and a projected strengthening in global demand will lead to a pickup in Canadian exports and business investment and, eventually, a more sustainable growth track’.
After the decision was announced the Pound to Canadian Dollar exchange rate was trading in the region of 1.8440 – little changed on the day.
The Canadian Dollar initially dropped against its US counterpart but later recovered much of its declines.
Earlier in the European session the GBP to CAD pairing had experienced fluctuations as a result of the UK’s employment figures.
While the news that the UK’s unemployment rate fell to a fresh over five-year low in the three months to May did boost the Pound against peers like the Euro, Sterling’s upward momentum was stymied by the news that UK wage growth slowed considerably in the period.
With average earnings increasing by less than half the rate of inflation, the Bank of England may hesitate before introducing any interest rate increases. That being said, former BoE official David Tinsley did say that the report suggests ‘improvements will continue. For monetary policy the signs that the labour market is heading nearer capacity is a further sign that a footstep on the road to normalisation cannot be delayed for too long’.
Meanwhile, during the North American session Canadian data showed that domestic factory sales increased by 1.6% in May. This was the fourth increase in five months.
Tomorrow movement in the Pound to Canadian Dollar exchange rate might be limited, but some fluctuations could occur in response to Canada’s International Securities Transactions figures – although the data is of low volatility.
UK news is lacking before the weekend.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Canadian Dollar,
,Pound Sterling,0.5418,
Canadian Dollar,,US Dollar,0.9286,
Canadian Dollar,,Euro,0.6862,
Canadian Dollar,,Australian Dollar,0.9918,
Canadian Dollar,,New Zealand Dollar,1.0646,
US Dollar,,Canadian Dollar ,1.0753,
Pound Sterling,,Canadian Dollar,1.8448,
Euro,,Canadian Dollar,1.4571,
Australian Dollar,,Canadian Dollar,1.0072,
New Zealand Dollar,,Canadian Dollar,0.9379,
[/table]
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