Interest rate rise in Canada strengthens the Canadian dollar vs the pound

GBPCAD Rates: Lack of Faith in the Pound Highlighted by Oil Crisis?

The pound vs Canadian dollar rate has dropped from above 1.70 during the course of this week after the Bank of Canada decided to increase interest rates yesterday afternoon.

The Canadian dollar strengthened by over 1% during yesterday as not only did the Central Bank hike rates but suggested that we may be seeing further rises in interest rate coming in the future.

Will there be further Canadian interest rate rises?

The tone from the Bank of Canada previously has been that any hike may be gradual, but now the expectation is that we’ll see the pace of interest rate hikes begin to increase in order to keep up with what is happening south of the border in the US.

With the US having raised interest rates a total of 9 times since December 2015, if Canada does not try and at least keep close in terms of the difference in the interest rate then the economy could start to come under a lot of pressure.

With oil prices falling recently, we generally would have seen the Canadian dollar weakening as they are a petro-dependent currency, but as we have seen with the interest rate hike yesterday this has been the over-riding factor for GBPCAD exchange rates.

Pound Sterling Forecast: Brexit continues to impact exchange rates

Meanwhile the UK is still facing a huge amount of uncertainty caused by the stalling of the Brexit talks recently. The stalemate between the UK and the European Union over the Irish border issue doesn’t appear that it will be concluded anytime soon.

We end the week with the latest US GDP figures tomorrow afternoon, and if the data remains positive then this could provide further evidence in support of another rate hike in the US. This could also have an influence on what the Bank of Canada do in the future to keep up with their southern neighbours. Therefore, I think we could see further losses for GBPCAD exchange rates in the short term.

If you’d like to discuss GBP/CAD rates and the latest interest rate decision from the Bank of Canada, or have another question you’d like to ask please don’t hesitate to use the form below and get in touch. I’ll be happy to respond personally.