Pound to Canadian Dollar Exchange Rate at 1-week high, More Gains Forecast

May 11, 2015 - Written by James Fuller

STORY LINK Pound to Canadian Dollar Exchange Rate at 1-week high, More Gains Forecast

Pound to Canadian Dollar Exchange Rate at 1-week high, More Gains Forecast

The Pound Sterling to Canadian Dollar exchange rate advanced to its best level in more than a week after the Bank of England left interest rates on hold at the record low level of 0.5% and as the Pound continued to receive support from last Fridays general election result. The ‘Loonie’ meanwhile remained under pressure from last week’s poor domestic employment data and speculation that oil prices will fall over the next few months.

The surprise general election victory for David Cameron’s Conservative Party eliminated concerns over lengthy coalition negotiations, which could have had a negative impact upon the UK economy. Sterling continued to trade higher against the Canadian Dollar and other currencies even as Bank of England policy makers chose to leave interest rates unchanged at the record low level of 0.5% and maintain the monthly quantitative easing stimulus programme unchanged at £375 billion per month.

‘The decision to keep the Bank Rate on hold was eminently predictable. Inflation remains resolutely absent, the long-awaited revival in pay growth continues to be elusive and signs of weakness in the global economy further caution against tighter monetary policy. We continue to expect rates to remain on hold until at least the first quarter of next year,’ said Martin Beck, senior economic advisor to the EY Item Club.

Continuing to weigh on the Canadian Dollar was last week’s data, which showed that Canadian employment declined by -19,700, a figure that was far higher than the forecast decline of -5000. The figure also reversed much of the 28,700 increase seen in March. The nation’s overall unemployment rate held steady at 6.8%. The fall in employment was mostly because of the layoffs seen in the nation’s oil sector.

The GBP/CAD exchange rate is forecast to continue to make gains in the long term as economists suggest that the fall in oil prices is not yet over. US shale production is set to continue to increase and the supply surplus that has forced prices lower shows no sign of falling. The big factor that will see the market suffer another supply glut will be if a deal is reached between the West and Iran over its nuclear ambitions. Tehran is expected to flood the market with 30 million barrels of oil. Other unsold barrels could also enter the market. There is a whopping 80 million barrels from Angola and Nigeria all unsold.

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