BoE Interest Rate Decision Boosts Sterling (Matthew Vassallo)

Pound Stronger vs Canadian Dollar this Morning

Sterling received a welcome boost yesterday, following the latest Bank of England (BoE) interest rate decision.

Despite our central bank keeping rates on hold at 0.25%, the members voted 5-3 against a rate hike. This was an unexpected improvement from last month’s 8-1 vote and Sterling instantly gained value as a result.

With the current high levels of inflation, an interest rate hike seems more likely over the coming months and the markets reacted to this, with GBP/CAD moving back above 1.69.

The CAD is likely to find support at 1.70, a key resistance level for the pair and as such those clients holding the Pound may wish to take advantage of yesterday’s unexpected improvement.

It was not all good news for Sterling, with UK Retail Sales figures coming out under expectation and with economic data of late mixed at best, I’m wary about assuming that yesterday’s positive trend will continue.

The markets will now look to the Queens speech next Wednesday, with any deal between Prime Minster Theresa May’s Conservative’s and the little known DUP party, likely to stabilise the Pounds recent devaluation.

With Brexit negotiations yet to begin and pressure building on the PM to form a strong working government ahead of this, there are still many unanswered questions. The on-going uncertainty surrounding these talks is unlikely to support any aggressive advancements for Sterling and therefore I still feel clients should be looking at short-term opportunities, rather than hold out for long-term sustainable gains.

Whilst a cloud of uncertainty hangs over the UK economy, Canada has concerns of its own. This is due to the price of crude oil falling to a five-month low recently, which is likely to have a negative effect on Canada’s export driven economy. With Oil being their main export, any downturn has an instant negative effect on their economy and the CAD is likely to lose value as a result. The Loonie has also suffered of late due to the tariff introduced on Canadian lumber to the US and with three quarters of Canada’s exports heading to their nearest neighbours, any further tariffs could heap pressure on CAD.

Due to the CAD being a commodity based currency, it is heavily reliant on global growth and a such any upturn in the US & China, two of the globes largest economy can drive these currencies values up. This means that investors will look to GBP/CAD for example and see the opportunity to make more money on bigger market swings and thus, the pairs value can fluctuate quite substantially.

If you have an upcoming GBP or CAD currency transfer to make and would like to be kept up to date with all the latest market movements, or simply wish to compare our award-winning exchange rates with your current provider, then please feel free to contact me on 0044 1494 787 478 and ask one of the team for Matt.

Alternatively, I can be emailed directly on [email protected].