Wednesday got the CAD up and running as we hit the middle of the trading week. It beat all its major rivals after a surprise increase in the Bank of Canada’s preferred measures of inflation. However, economists are suggesting that buyers may be looking to cash out and walk away from the currency ahead of its anticipated weakness in 2020. For the GBP, a bumpy road has ensued post-election but yesterday it found some support. However, economists are suggesting that the Bank of England (BoE) may start to look towards interest rate cuts in 2020.
Shock Inflation Measures Rise Giving the CAD an Uplift
Reports from Statistics Canada announced Wednesday that inflation had fallen 0.1% in the month of November. The report also stated that the annualised rate of price growth stayed stable at 2.2% but the shock came from two of the Bank of Canada’s (BoC) three preferred measures of inflation which rose last month. These measures are variants of ‘core inflation’, and with one rising much more than anticipated this put the CAD in good stead for the days trading. The BoC’s ‘median CPI’ was the best performing measure, jumping from 2.2% to 12.4% as the markets were expecting an unchanged figure. The numbers revealed yesterday were all above the 2% threshold that was set by the BoC and all did so in a month which has seen a slowing economy. Therefore, there has been new speculation that the BoC is unlikely to follow in the footsteps of rival central banks in cutting interest rates as there appears to be little scope to justify this action.
GBP Finds Support but Bank of England Rate Cut Cannot be Ruled Out
The GBP found some support on Wednesday following the release of inflation data from the Office for National Statistics. The data showed that the inflation rate had remained at 1.5% in November whilst markets were anticipating a decline to 1.4%. Added to this, the core inflation remained at 1.7% and thus holding steady, this was important as the core inflation is more valuable to central bankers. However, even though the data showed no declines, the figures were still below the 2% target that the Bank of England had set. If this is combined with the economic and political outlooks of the UK, then the stability of the interest rates look troublesome for the GBP. Economists are tipping the BoE to cut rates in 2020, with many other rival currencies looking to follow suit, except possibly the Canadian Dollar after the surprise performance in its BoC inflation targets.
Attention will turn to the BoE’s meeting later today which is set to announce its next rate decision at 12:00.
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