‘Loonie’ (CAD) Retreating ahead of Bank of Canada (BOC) Rate Decision
Although pundits are cautious this morning in advance of the September UK Public Sector Net Borrowing figure the GBP/CAD exchange rate is recovering some ground. This ‘Loonie’ (CAD) dovishness is ahead of the Bank of Canada (BOC) Rate Decision later in the day, in spite of expectations that policymakers will not vote to change interest rates at this meeting. At time of writing, the GBP/CAD pairing was trending in the range of 2.0093.
Earlier…
The continued erosion of the UK’s domestic steel industry has lowered the appeal of the Pound (GBP) this morning, although the GBP/CAD exchange rate remains up thanks to uncertain trader reaction to yesterday’s Canadian Liberal election victory.
Chinese Slowdown Fears and Iranian Production Pledge Prompted Oil Downturn to Weigh on ‘Loonie’ (CAD)
Oil prices took a battering on Monday thanks to the release of third quarter Chinese GDP, which slowed to its lowest pace of growth in seven years at 6.9%. While this was not quite as severe as expected, bettering the forecast of 6.8%, the figure nevertheless indicated that the world’s second largest economy has continued to contract. With commodities dragged into a sharp slump as a result of this discouraging print, the ‘Loonie’ (CAD) was equally pulled down against rivals. The outlook of oil was not improved by comments from the Iranian Oil Minister, who affirmed that the nation is looking to increasing its output to pre-sanction levels and that the Organisation of the Petroleum Exporting Countries (OPEC) was unlikely to lower production in spite of the persistent global supply glut.
Although the Rightmove House Prices figure for October weakened, sliding to 5.6% from 6.4% in September, the Pound (GBP) strengthened as a result of general market uncertainty. Speculation also suggested that current conditions within the housing market could prompt the Bank of England (BoE) to move sooner on interest rates, in order to avoid another price bubble. Naturally this helped to shore up the GBP/CAD exchange rate further.
Further Job Losses in UK Steel Industry Undermining Pound (GBP) Today, ‘Loonie’ (CAD) Weaker after 2015 Election Victory
Overnight the Canadian general election saw the Liberal Party sweep to victory, with pundits relatively cautious in their response to new Prime Minister Justin Trundeau and the prospects of the new policies that this government will bring into force. In spite of this feeling of uncertainty somewhat weighing on the ‘Loonie’ this morning, however, the currency has been shored up by a relative steadying in oil values after yesterday’s slump. Nevertheless, the outlook of the Canadian Dollar appears uncertain, particularly ahead of tomorrow’s Bank of Canada (BOC) Rate Decision.
The Pound, meanwhile, has entered a downtrend on the news that Tata Steel will be cutting 1,170 jobs across its UK operations to add to the mounting pressure on the domestic steel industry. A strong currency was among the reasons cited for these job losses, alongside the dumping of cheap Chinese steel on the European market. Another blow for the domestic economy, this has been seen to reduce the odds of a near-term interest rate rise from the BoE. Nevertheless, the GBP/CAD pairing is making gains this morning, capitalising on the relative softness of the ‘Loonie’.
GBP/CAD Exchange Rate Forecast: Bank of Canada Rate Decision Commentary Could Provoke ‘Loonie’ Volatility
Wednesday is likely to be a particularly volatile day for the GBP/CAD pairing, with the release of the UK’s Public Sector Net Borrowing figure for September and the latest BOC Rate Decision. Although the central bank is not expected to make any change in monetary policy, should policymakers prove dovish in accompanying comments investors could be compelled to move away from the ‘Loonie’.
If UK government spending is shown to have narrowed in the last month then the Pound could be in for a stronger rally, particularly after the unexpectedly wide deficit reported in August. Lower borrowing would be a positive signal for the domestic economy, though it may struggle to outweigh recent slowdown concerns.
Current GBP, CAD Exchange Rates
At time of writing, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was up in the region of 2.0192, while the Canadian Dollar to Pound Sterling (CAD/GBP) pairing slumped in the range of 0.4947.
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