GBP CAD Exchange Rate Advances Following Dovish BoC Meeting

Modified: Thursday, 7 December 2017 12:05 BST - Written by John Cameron

STORY LINK GBP CAD Exchange Rate Advances Following Dovish BoC Meeting

The Pound Canadian Dollar (GBP CAD) exchange rate struck a new weekly high this morning on the back of the Bank of Canada’s (BoC) latest policy meeting and Brexit optimism.

Canadian Dollar’s (CAD) Tumbles as BoC Appear Dovish towards Future Rate Hikes

The Canadian Dollar remains on the back foot this morning after plummeting yesterday in reaction to the BoC’s latest rate decision.

As had been widely forecast ahead of the meeting policymakers voted to leave interest rates on hold this month as the bank monitors the impact of the two rate hikes the bank implemented earlier in the year have on the domestic economy.

Instead it was the bank’s more cautious outlook towards future monetary tightening that weighed on the ‘Loonie’ with the bank giving no real clear indication of when it may seek to raise interest rates again.

The bank’s accompanying statement read;

‘While higher interest rates will likely be required over time, [the bank] will continue to be cautious, guided by incoming data in assessing the economy's sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.’

While some analysts remain confident that the BoC will continue with its accelerated pace of monetary tightening, they suggested that the bank may look to stay is hand until at least April, partly so they can be more sure of how NAFTA negotiations will unfold.

Royal Bank of Canada (RBC) economist Josh Nye said;

‘That will give them some time to evaluate the impact of this summer's two rate hikes, hopefully, have a better idea of how one of the most significant risks facing the economy, the NAFTA renegotiation, is evolving.’

Pound (GBP) Strengthens on Hopes of Breakthrough on Irish Border

Sterling sentiment is creeping higher again this morning on reports that the UK will offer new wording for a Brexit deal on the Irish Border.

Theresa May is expected to put the new text before the Democratic Unionist Party (DUP) and Irish Government later today, with markets hoping that the new wording will be accepted by both parties.

The Irish prime minister Leo Varadkar said;

‘I want us to move to phase two, if that is possible, next week but the absolute red line that has been there for some time remains and it's been there since the day of the referendum and even before.’

‘My responsibility as taoiseach - as prime minister of Ireland - is to protect our fundamental national interest and that is the rights of Irish citizens in Ireland and Britain and also the avoidance of a return to a border between Northern Ireland and Ireland.’

This comes after the DUP torpedoed a possible Brexit deal on Monday after it rejected proposals for the Irish border which would see Northern Ireland remain within the EU customs union after Brexit in a move to avoid a hard border with the Republic of Ireland.

However even more pressure was placed on the PM to solve the dispute yesterday as the EU’s chief Brexit negotiator, Michel Barnier placed a 48 hour deadline on talks, stating that the failure to put forwards a final exit deal by the end of the week would cause trade talks to be delayed until 2018.

GBP CAD Forecast: Canadian GDP to Slow?

Looking ahead movement in the GBP CAD exchange rate for the remainder of this week will likely be closely tied to the state of Brexit negotiations, with the pairing likely to jump again if Theresa May is able to finalise the UK’s exit agreement.

However the Pound could also see some influence from tomorrow’s trade and production figures, with expectations that Britain’s Industrial production will have remained flat in October unlikely to be welcomed by investors.

Meanwhile the Canadian Dollar could see some movement later today with the publishing of the latest Ivey PMI, with the ‘Loonie’ expected to fall if the index reveals that Business confidence tumbled in November as expected.

Current Interbank Exchange Rates

At the time of writing the GBP CAD exchange rate was trending around 1.7179 and the CAD GBP exchange rate was trending around 0.5826.

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TAGS: Pound Canadian Dollar Forecasts