GBP to CAD forecast: Will the Bank of Canada keep interest rates on hold?

GBP to CAD forecast Will the Bank of Canada keep interest rates on hold?

Bank of Canada expected to keep interest rates on hold

The Bank of Canada continues to buck the trend in the face of global interest rate cuts and are widely expected to keep interest rates steady at 1.75pc late this afternoon. The Canadian economy continues to be buoyed by a robust domestic employment market and investor optimism that a long-awaited trade deal may be forthcoming between the US and China in the coming weeks.

As a commodity-linked currency, the Canadian dollar will benefit from a resolution in the trade wars as global production ramps up in the face of reduced costs and improved trading conditions, this could see a turnaround in the recent gains that GBP has enjoyed against the CAD.

Sterling enjoys stability over major currencies

The pound has been making headway versus the Canadian dollar over recent weeks continuing the trend of increased stability across most major currencies. This has seen an improvement in the value of the pound from its lowest levels versus the Canadian dollar since September 2017 of just below 1.59 to the recent highs of just over 1.70 on interbank exchange rates.

The pound’s steady gains have run parallel to the dissipating risk of a no-deal Brexit but the story here is far from over. As the UK prepare to head back to the polls for a general election in December, the shape of Brexit is still unclear but remains very much in focus. With an agreed ‘flextension’ from Europe moving the deadline (again) to January 31st 2020 there are hopes from all three major parties that this opportunity will allow them a working majority and the ability to push forward plans in their favoured direction. The impact on the pound of this standstill has seen levels slip back to a more comfortable 1.67 pivot.

This leaves three distinct paths, the Conservatives current Withdrawal Bill which includes a controversial solution on the Irish backstop, the Labour party’s belief that a deal, once agreed in EU, should be voted on by the UK people, and the Liberal Democrats looking to scrap the referendum result entirely in favour of remaining in Europe. History tells us that election uncertainty does not favour the pound and with the stakes so high this time round the current calm could be seen as an opportunity to purchase Canadian dollars before the storm.

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