The Pound has been heading in a downwards direction vs the Canadian Dollar over the last few days as the price of Crude Oil has been rising recently hitting as high as USD $75 per barrel.
During the last week the price of a barrel has risen by $3 and as the commodity is the biggest export for the country this has really provided the Canadian Dollar with a big boost against a number of different currencies including vs the Pound.
Tomorrow we could be in for more fireworks when the UK has Super Thursday which includes the latest Quarterly Inflation Report for the UK as well as the latest monetary policy decision due to be released by the Bank of England.
The chances are very high that we’ll see a rate hike coming tomorrow to move the base rate from 0.5% to 0.75% and this would typically help to increase the Pound’s value.
However, the most important part of the day is likely to come when the Bank of England holds the press conference as they will provide clues as to whether or not we’ll see further rate hikes in the future.
I personally think that one of the main reasons for tomorrow’s rate hike is that the Bank of England may be planning for an interest rate cut next year and by hiking rates now this allows them some room to manoeuvre next year if necessary.
Two years ago, shortly after the Brexit vote, the Bank of England announced an interest rate cut to encourage consumers to keep spending and reduce household debt as the central bank were concerned about the economy going in to free-fall.
Therefore, this is why I think the Central Bank will be rather cautious in their approach and tone when the press conference is held tomorrow afternoon and this could have a negative effect on the value of the Pound vs the Canadian Dollar.
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