As the UK government continues to take control by forcing the nation into total lockdown, limiting the majority of movements for the 66 million in the UK, only allowing keyworkers out of their home while everyone else are only allowed out for visits to the supermarket and short periods of exercise. These moves coming around 2-3 weeks behind the rest of Europe seem to be giving confidence to market that the UK now has some degree of confidence in the spread of COVID-19. This has resulted in the pound seeing back to back days of gains against the Canadian dollar. This is a welcomed boost for the British pound.
After seeing the currency reach its highest level against CAD since April 2018 at 1.80 on 9th March, the currency pair quickly fell to 1.66, the lowest level seen since October 2019, when the UK appeared to be heading towards leaving the EU without any deals in place.
Already today the pound has climbed back above 1.70, seeing over 1.50% gains this morning, which is a strong sign the markets are ready to back the pound again after a difficult period. After facing criticism from some corners that Boris Johnson and his government were being slow to react to spread of COVID-19, it now appears that they are making some big calls, with the promise that they will support those who are out of work due to the virus financially, including those on zero hour contracts. The government are due to announce further plans of how they will support the self employed and freelance contractors. The prospect of the UK seeing any growth this year has been shattered with confirmation of a global recession being a matter of when rather than if. Support by the UK government to provide financial aid to individuals and businesses effected the most will help county get back out and to work in the best way possible as soon as possible.
The Bank of England have also taken decisive action by cutting interest rates 0.1% and restarting its asset purchase programme aka Quantitative Easing (QE) and are prepared to increase if necessary.
The Bank of Canada last week took similar action by restarting their QE programme and have twice this month cut interest rates from 1.75% down to 0.75. These moves had previously helped Canadian dollar gain value against the pound, before we saw the tide turn and the pound see some welcome gains against the dollar. With the situation being analysed by the hour things could quickly change again for the two currencies value, either further gains for the pound or a return to gains for the Canadian dollar.
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