Canadian Outlook Questioned Despite Maintaining Cash Rate as GBP Awaits BoE Decision

GBP to CAD Rate: Sterling Gains Against the Canadian Dollar Ahead of Bank of Canada Statement

Last week saw the Bank of Canada announce its decision regarding their monetary policy. The decision was revealed as a maintenance of the current interest rate of 1.75%. Though the hold was positive, critics have begun to question if the rate is sustainable as the economy pushes forward. Meanwhile, the GBP has experienced recent gains after last weeks positive economic data releases. Both the labour market report and PMIs for the manufacturing and services sectors were above targets and gave the GBP a huge lift. The UK now awaits the BoE’s interest rate decision which is due this week.

Canadian Dollar Holds Interest Rate Steady, but Critics Question Its Sustainability

The Bank of Canada revealed last week that they would keep their interest rate fixed at 1.75%. This did not shock too many in the market as the Canadian Dollar has fared well over the past two or three years and this has allowed it to keep its rate much higher than many rival currencies. Despite this positive hold however, critics are questioning hold long the currency can hold onto this interest rate level. Jordan Rochester, a strategist at Nomura noted that the external risk environment has deteriorated following the outbreak of the coronavirus. He suggests that this is likely to affect CAD and could further reinforce an already challenging backdrop for flows into Canadian assets.

Being the third worst performing currency last week, the Canadian Dollar has its work cut out for it going into the new trading week. It may be fighting an uphill battle however as comments from the Bank of Canada suggested that despite holding the cash rate, the rate could be cut in the coming months if the Canadian economy does not see any signs of a rebound. Upcoming this week for the Cad will be Thursday’s speech from BoC deputy Governor Paul Beudry and Friday’s GDP data for November. Both will be keenly watched by CAD investors.

GBP Gains on Positive Economic Data Last Week but Awaits the BoE’s Interest Rate Decision Due on Thursday

After a positive week last week for GBP, the pressure is piled back on this week as it awaits its BoE interest rate decision. The decision could set the currency on course for a post-election rebound if the cut is voted against. The UK economy has shown signs of a rebound with its positive labour market and services PMI data, but a cut from the BoE would send this positivity spiralling. GBP investors will be eagerly awaiting the decision which is due on Thursday.

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