GBP/CAD reaches 2.03

Pound to Euro Exchange Rate Outlook: Busy Week Ahead for GBP to EUR Rates

GBP/CAD rates have been slowly correcting upwards following the massive gains for the Canadian Dollar after the events of last week. The correction, however, is only slight, showing that the same market forces are still in place with market participants still trying to free themselves of their Sterling to purchase Canadian Dollars.

The announcement by Janet Yellen, the head of the Federal Reserve Bank of America, concerning the near certainty of an interest rate hike in the US has caused severely ripples across the currency market.

Firstly, USD/CAD rates spiked due to the strength imbued in the US with these surprisingly bullish remarks from a normally dovish woman.

However, GBP/CAD fell rapidly. The reason is two fold.

First, the Canadian Dollar strengthened due to its association with the US economy. So such a positive statement from Yellen about the US’s current health bodes well for long-term forecasts for their largest trading partner over in Canada.

Secondly, the positive news for the US actually caused the Pound to weaken, causing GBP/CAD rates to spike downwards. The reason for this is that arguably the most important determinant for any major currency’s value since the 2007/8 financial crisis has been the timeline for when interest rates will rise once again.

The UK, by contrast, has recently been rather dovish about raising rates. One member even stated publicly that cuts may be on the cards to protect the UK from the recent revision downwards of global growth forecasts following China’s economic woes. 

As such those holding Sterling have sold off and ‘traded-up’ for USD as the certainty for short-term returns from an interest hike are now much higher. This mass sell-off has weakened Sterling across the board and this helped GBP/CAD to drop further on Friday.

Until the release of Canadian Gross Domestic Product figures (GDP) on Wednesday, it seems that there is little to stop these current market forces from continuing to take effect. Rates have corrected slightly, but a further fall wouldn’t surprise me either.

Anyone who has CAD to buy in the near term can contact me directly on teh@currencies.co.uk to discuss how to navigate the next few days before the announcement of Canadian GDP figures. I am also happy to offer a free quote on your transfer, and I’m confident that I can show you a saving against your bank or alternative currency provider.