Danger of BoE Interest Rate Freeze Triggering GBP/CAD Exchange Rate Drop
The Pound (GBP) has made moderate gains against the Canadian Dollar (CAD) today, but remains at risk of losses on Thursday after a Bank of England (BoE) meeting.
BoE policymakers will be making their monthly interest rate decision and in a sharp turnaround of forecasts, officials aren’t expected to raise interest rates this month.
There had been speculation as recently as April that a rate hike was likely in May, but the latest UK economic data has put a dampener on predictions.
Sajiv Vaid of Fidelity MoneyBuilder Income Fund has warned that there could be volatility whatever the BoE’s decision. Considering the outcomes, Mr Vaid has said;
‘Having raised expectations [for a May interest rate hike], the BoE now find themselves in an unenviable dilemma of “damned if they do and damned if they don’t…”, a horrible predicament for any central bank to find themselves in’.
Pound traders may react positively to higher interest rates, but economists might question the viability of this action given apparent UK economic fragility.
On the other hand, while another interest rate freeze might be prudent, it is unlikely to please those looking for a stronger Pound so could devalue Sterling.
Will Rising UK Unemployment Rate Extend GBP/CAD Exchange Rate Losses?
The Pound’s potential troubles could continue next week, when UK unemployment rate data is released on 15th May.
Current expectations are for the jobless rate to have risen from 4.2% to 4.3% in March; such a result could lower trader confidence and damage the Pound.
February’s drop to 4.2% was a 42-year low in the UK unemployment rate, so if the reading rises again then this would have negative implications for the UK economy.
Canadian Dollar to Pound Exchange Rate Forecast: Will Trump’s Iran Decision Damage CAD/GBP?
The next factor which could influence the Canadian Dollar to Pound (CAD/GBP) exchange rate will be US President Donald Trump’s decision on the Iran nuclear deal.
Mr Trump seems poised to re-impose sanctions or leave the deal in the near-future, which could cause widespread commodity price and currency fluctuations.
Although sanctions against Iranian oil exports would boost global oil prices, the Canadian Dollar could struggle because of a deteriorating commodity market outlook.
If Mr Trump surprises analysts and leaves the nuclear arrangement is place, however, the Canadian Dollar could be unaffected or appreciate due to defused tensions.
Will Higher CA Employment Boost Canadian Dollar to Pound (CAD/GBP) Exchange Rate?
Looking past the imminent volatility of the Iranian deal, the Canadian Dollar (CAD) could shift against the Pound (GBP) when Canadian jobs market data is released.
The figures out on Friday are forecast to show a 17.4k rise in employed persons, but no shift in the current unemployment rate of 5.8%.
If the number of persons in employment is greater than expected and the jobless rate drops then the Canadian Dollar to Pound (CAD/GBP) exchange rate could rise.
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