The Pound to Canadian Dollar exchange rate has begun the week flat, as the Pound continues to struggle for direction after the important Bank of England (BoE) meeting last week.
Interest rates in the UK have risen to their highest level in the past 10-years, after last week all voting members of the BoE voted in favour of making the hike. This is a positive sign for the UK economy and the decision has come about due to prolonged inflation levels above 2% and a pick-up in certain area’s of the UK economy. The global economy has also picked up which is dragging the UK economy along with it, although I think that now the hike has happened the Brexit will once again become the major influence on GBP exchange rates.
Under normal circumstances, a rate hike usually results in a boost to the underlying currency. The comments by BoE Governor Mark Carney afterwards sent the Pound lower as the markets received them as dovish. With Carney suggesting that there is a possibility of cutting rates in future if necessary, and also highlighting that the chances of a no-deal is no a realistic possibility the Pound came under pressure. It has also emerged over the weekend that there is a 60 to 40% chance of a no-deal according to Liam Fox, the UK’s International Trade Secretary.
Now that the rate hike has taken place, the markets are likely to follow economic updates closely in order to see whether the rate hike was the right decision under the current circumstances. Especially as the UK GDP figure for Q2 is set for release on Friday and the figure expected is just 0.1%. Should this figure show a negative I expect to see a sell-off in the Pound’s value, and if you wish to plan around this event or discuss an upcoming currency requirement involving it do feel free to get in touch.
Data out of Canada is light this week, although Friday will also be the day of key releases as Employment data will be released at 1.30pm, after the UK’s GDP data. If you wish to be updated in the event of a major move for GBP/CAD, do feel free to get in touch. You can reach me on [email protected] for more information.