Canadian Dollar & British Pound Forecast - GBP CAD Trends Higher, Sterling Firms vs Euro & US Dollar

September 22, 2014 - Written by James Fuller

STORY LINK Canadian Dollar & British Pound Forecast - GBP CAD Trends Higher, Sterling Firms vs Euro & US Dollar

The British Pound to Canadian Dollar exchange rate (GBP/CAD) trended higher as the new week commenced, following investor sentiment in Sterling being restored.

The run-up to the Scottish referendum hit the Pound hard, with ongoing speculation that Scotland may leave denting Sterling’s exchange rate.

However, the Pound has been able to enjoy some stability now the vote has shown that Scotland will be remaining within the UK.

The Canadian Dollar to Australian Dollar exchange rate is trading down -0.05% at 1.01988 CAD/AUD.
The Canadian Dollar to Euro exchange rate is trading up +0.12% at 0.70573 CAD/EUR.
The Canadian Dollar to Pound Sterling exchange rate is trading up +0.28% at 0.55488 CAD/GBP.
The Canadian Dollar to New Zealand Dollar exchange rate is trading up +0.22% at 1.11913 CAD/NZD.
The Canadian Dollar to US Dollar exchange rate is trading up +0.4% at 0.90938 CAD/USD.

Meanwhile, the Canadian Dollar has softened in recent weeks and is likely to remain bearish ahead of the speech expected from Bank of Canada Deputy Governor Carolyn Wilkins. However, Canadian inflation figures beat forecasts last week and raised speculation that interest rate hikes could occur in the Canadian economy for the first time in four years.

Canadian Dollar Lower Against Pound and US Dollar Ahead of BoC Statement

Monday will see BoC Deputy Governor Wilkins speaking at the CFA (Chartered Financial Analyst) Society, in a day when the UK will release no domestic data. Governor Wilkins’ speech may alter the Pound to Canadian Dollar exchange rate somewhat, with investors interested in the possibility of talks for a rise in borrowing costs. The BoC recently stated that they were not interested in trying to control the ‘Loonie’ and that any interference with measures such as borrowing costs could damage the bank’s ability to manage domestic monetary policy.

Canada’s Core Consumer Price Index unexpectedly jumped to 2.1% in August, higher that the 1.8% forecast. Forex expert Rahim Madhavji commented: ‘Positive inflation numbers... could cause the Bank of Canada to get a little uncomfortable with their view on inflation and interest rates.’ The Bank of Canada holds a 2.0% target for inflation rates and last week’s figure was the first time in two years that the Canadian economy was able to achieve higher than the target figure. Economist Benjamin Reitzes stated his views saying: ‘The surprisingly big acceleration in core CPI blows the Bank of Canada’s third-quarter forecast for 1.7% average out of the water, with something around 2% more likely. Given the broad nature of the gains, it might be tough for the [central] bank to argue the increases are transitory, and a continued upward trend will be difficult to overlook.’

Forecast for the GBP CAD Exchange Rate

In the coming week, UK domestic data publications will be relatively sparse. Meanwhile, Canadian Retail Sales figures are due for release on Tuesday (these figures are used to measure the amount of spending in the economy) followed by Average Weekly Earnings on Thursday. The Pound, meanwhile, is most likely to be affected by Bank of England Governor Mark Carney’s speech in Wales on Thursday at the Institute and Faculty of Actuaries General Insurance Conference.

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