The Pound to Canadian Dollar (GBP/CAD) exchange rate maintained its earlier gains in the late half of the European session, after the BoE meeting minutes caused a Pound Sterling rally.
Moreover, the details of the minutes painted a slightly more upbeat picture than last week’s BoE press conference. Governor Mark Carney painted a rather downbeat and pessimistic view of inflation in the UK which contrasted with the November meeting minutes.
The minutes read: ‘There was also a risk that the degree of spare capacity would be eliminated more quickly than assumed [which could] potentially result in inflation rising to, and subsequently overshooting, the 2% target.’
The Pound to Canadian Dollar (GBP/CAD) exchange rate rallied after the Bank of England released its meeting minutes which showed another divergence in votes amongst policymakers. Leading up to the release, economists’ had speculated that there may be less of a division amongst board members; however, this wasn’t the case.
The Pound rose against a basket of other majors when it was revealed the Monetary Policy Committee still housed two hawks who are in favour of immediate interest rate increases.
Earlier in the session… Wednesday has seen the Pound to Canadian Dollar (GBP/CAD) exchange rate remaining in a narrow range ahead of the Bank of England’s (BoE) meeting minutes.
The minutes will show the amount of policy makers that voted for an immediate UK interest rate hike. In the last three meetings, two of the nine Monetary Policy Committee (MPC) boardmembers have split from the general consensus and recommended the central bank increase borrowing costs.
If the vote remains at 2:7 the Pound could be offered some support. However, if the MPC hawks don’t continue to vote in favour, the Pound could drop.
Despite gaining against other majors such as the US Dollar (GBP/USD) on Tuesday, the Pound to Canadian Dollar (GBP/CAD) exchange rate remained relatively static–despite UK data and commodity price falls. Investor confidence increased in the Euro on Monday after the German ZEW Economic Sentiment Survey rose higher than economists’ had forecast.
Any improvement for the Eurozone is positive news for Canada, as Pierre Siklos states: ‘The Eurozone is not out of the woods yet. An economic downturn or financial shock there cannot be ruled out. I find the effect of setbacks in the Eurozone on Canada’s economy could be significant.’
UK Consumer Price Index Gains on Toys and Computer Games
Earlier in Tuesday’s session… The Pound to Canadian Dollar (GBP/CAD) exchange rate has been trending in a relatively narrow range since the release of the UK Consumer Price Index (CPI).
While the Core CPI measure showed annual stagnation by coming in at 1.5%, the non-core index rose to 1.3% from 1.2%. The figure comes just days after the Bank of England (BoE) expressed concerns about disinflation.
One factor that has allowed UK inflation to rise is computer games sales and a rise in the cost of toys.
Bank of England Concerned about Disinflationary Pressures
Last week BoE Governor Mark Carney suggested that consumer prices would temporarily dip below 1% and said that he expected to write a letter to Finance Minister George Osborne in the near future to explain why inflation has remained weak.
Carney stated at the recent G20 summit: ‘We’ve got huge disinflationary forces coming from our trade partners, particularly in Europe, and commodity prices have gone down quite sharply… In fact, it takes us three years to get inflation back up to 2% on our forecasts.’
After Carney suggested that the UK would struggle with inflationary levels for the next three years, hopes of an interest rate hike in the near future were abandoned. Carney also commented on rate hikes stating: ‘How can it be that in the UK, where the economy has been growing at 3% for the past year and a half, that interest rates are at half a percent?’
Carney went on to answer his own question by saying: ‘There is still slack in the labour market in the UK.’ Recent UK figures have been mixed, showing growth in some areas and limited expansion or even contraction in others.
Pound to Canadian Dollar (GBP/CAD) Exchange Rate Forecast
Friday could be interesting for the GBP/CAD exchange rate with Canada releasing its own CPI. At present, expectations are for the Bank of Canada’s Index to remain at 2.1% in October on the year. The Bank of Canada’s (BOC) inflation rate target is between 1-3%.
The Canadian Dollar has declined in recent weeks as a result of falling oil prices. However, over the last several days oil prices have risen as investors’ price in the likelihood that Organisation of the Petroleum and Exporting Countries (OPEC) will reduce oil output in the upcoming meeting due to the global surplus.
The meeting will take place in Vienna Switzerland on the 27th of November.
The GBP/CAD exchange rate is trending in the region of 1.7679.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
, Canadian Dollar , 1.7696,
US Dollar,, Canadian Dollar , 1.1328,
Euro, ,Canadian Dollar , 1.4199,
Australian Dollar,, Canadian Dollar , 0.9804,
New Zealand Dollar,, Canadian Dollar , 0.8953,
[/table]
