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Bullish Oil Price and BOC Optimism Keep Pound Canadian Dollar Exchange Rate on Downtrend

December 5, 2016 - Written by Ben Hughes

British pound to canadian dollar exchange rate forecast

As the mood towards oil remained positive on Monday the Pound to Canadian Dollar struggled to gain any fresh traction, despite positive UK data



While risk appetite generally weakened at the start of the week the price of Brent crude remained solid, trending in the region of US$55 per barrel and helped to support the commodity-correlated Canadian Dollar (CAD).

Although developments in Europe prompted some fresh investor anxiety the Pound Sterling Canadian Dollar (GBP CAD) exchange rate remained on a weaker footing.

Confidence in the Pound (GBP) was somewhat muted as the Supreme Court convened to hear the government’s appeal on whether Parliament must vote before the triggering of Article 50, with Brexit-based worries coming back to the fore.
GBP to CAD exchange rate chart

Latest Pound/Canadian Dollar Exchange Rates





Demand for the Canadian Dollar is expected to remain relatively bullish in the coming week, despite the persistent strength of the US Dollar (USD) and some degree of uncertainty as to whether OPEC’s agreed production cuts will entirely materialise.



Investors are optimistic that the Bank of Canada (BOC) will maintain its neutral policy bias at its policy meeting on Wednesday, an outcome which would offer a fresh vote of confidence in the resilience of the domestic economy.

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As Robert Kavcic, senior economist at BMO Capital Markets, noted:

‘The Bank of Canada looks to be firmly on hold this week, with the latest run of data quashing any expectations for a near-term rate cut. After leaving the door open for further easing in the prior statement/press conference, Governor Poloz mused this week that it would take a significant departure from the BoC’s inflation outlook to consider more stimulus.’


CAD to GBP exchange rate chart

Positive UK Services PMI Not Enough to Bolster GBP CAD Exchange Rate



Although it was somewhat overshadowed by political developments and worries, November’s UK Services PMI offered another indication of the resilience of the domestic economy.

As the measure rose from 54.5 to 55.2 this would seem to bode well for the fourth quarter’s growth figures, given that the bulk of the UK’s economic activity is concentrated within the service sector.

With growth appearing to remain resilient in the face of ongoing uncertainty underlying support for the Pound is still solid, with potential for renewed gains on the back of further positive domestic data.

Higher Industrial Production May Prompt Pound Sterling Rally



Wednesday’s UK industrial and manufacturing production figures could offer the GBP CAD exchange rate a fresh rallying point, assuming that output strengthened on the year in line with forecasts.

Also in focus will be the NIESR GDP estimate for November, which may deter investors if it suggests a further loss of momentum within the wider economy.

Either way, the upside potential of the GBP CAD exchange rate is likely to be limited thanks to market bullishness surrounding the BOC meeting.




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