Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Bank of Canada (BoC) Rate Decision Boosts Confidence

March 9, 2016 - Written by Frank Davies

STORY LINK Pound Sterling to Canadian Dollar (GBP/CAD) Exchange Rate Forecast: Bank of Canada (BoC) Rate Decision Boosts Confidence

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate appeared to be holding its ground until Sterling began sliding after the Bank of Canada’s highly anticipated interest rate announcements.

Pound (GBP) Experiences Sudden Drop After Bank of Canada’s Self-Confident Announcement

As many analysts expected, Wednesday afternoon’s Bank of Canada (BoC) announcement revealed that the interest rate would remain at 0.50%. While the Pound (GBP) initially held sturdy against the anxious Canadian Dollar (CAD), the pairing opening the day around 1.9063, Sterling suffered a kneejerk drop after the BoC’s announcement, currently trending around 1.8855 with influential movements around -1.1%.


This comes hot off the heels of muted ‘Loonie’ movements, a common occurrence in the run up to central bank announcements. Investors and analysts had anticipated that Canada’s interest rate would remain at 0.50% but feared the attitude would be bearish and imply a rate cut was imminent.

Reports of the announcement state that the central bank is maintaining its overnight rate target, with a bank rate of 0.75% and a deposit rate of 0.25%. BoC’s website claims that the global economy is progressing as the Bank anticipated in its January Monetary Policy Report (MPR). Inflation in Canada is reportedly ‘evolving broadly’.

This confidence and expectation of continued growth in Canada weighed on the currently weak Pound, with the currency passively accepting loss due to investor lethargy towards the anxious currency.

This week, UK news has been unabashedly ‘Brexit’-focused, with controversial comments from the Bank of England’s Mark Carney and the International Monetary Fund’s Christine Lagarde displaying doubt towards the security of an EU-less Britain.

Arguments about whether or not Britain is better off without the EU heat up as disputed claims that the Queen of England backs a ‘Brexit’ set news alight today and further damaged UK confidence.

Possibility of Further Oil Concerns may hold Canadian Dollar back from Riding BoC Confidence

The nation of Kuwait announced yesterday that it would not agree to curb oil production until the oil freeze was agreed on by all other major producers. Iran had just recently re-joined the oil trade and is eager to increase production, unlikely to agree to a ‘freeze’.

Despite oil futures showing great promise this week as oil prices rise once again, it’s unclear if this disagreement between leading producers could cause considerable obstacles in the health of the oil market – a market that Canada’s commodity currency relies on heavily. It is also possible that sudden investor confidence in Canada could recoil and normalise after the Bank of Canada’s confidence has set in.

However, the Pound seems likely to continue weakening as the EU referendum vote in June draws closer. Positive UK data this morning was unable to inspire Sterling investment, a trend that seems increasingly common as ‘Brexit’ arguments continue.

The Canadian Dollar also looks set to benefit further from the recent investor fondness for the commodity bloc. Heavily disappointing Chinese data from Tuesday was offset today by claims that China’s central bank is using stealth measures to stimulate the economy and reinstall confidence in China’s economic growth, as well as strong consumer price growth.

This promises benefits to high-risk currencies but as a vital part of China’s commodity trade the CAD as a commodity currency is also likely to benefit.

The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.8855 while the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate trends in the region of 0.5300.

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TAGS: Currency Predictions Pound Canadian Dollar Forecasts