GBP/CAD Exchange Rate Rises after BoE Keeps Interest Rates on Hold

December 14, 2017 - Written by David Woodsmith

STORY LINK GBP/CAD Exchange Rate Rises after BoE Keeps Interest Rates on Hold

On Wednesday’s trading session, the Pound made a tentative rise against the Canadian Dollar. The pairing opened trading in the region of 1.7140, later advancing to the 1.7186 by close of trading.

Pound Trades Higher after BoE Prepares Traders for 2018

Today’s big news has concerned the Bank of England (BoE), which has left UK interest rates at 0.50%.

This was the expected outcome, so traders have been paying closer attention to BoE minutes for the recent meeting.

Also out with the minutes was a press conference held by BoE Governor Mark Carney.

While answering questions, Carney was explicit in identifying why inflation has risen to such a high level in recent months, stating;

‘It remains the case that inflation has been pushed above the target by the boost to import prices that resulted from the past depreciation of Sterling.

The Monetary Policy Committee (MPC) judges that inflation is likely to be close to its peak, and will decline towards the 2% target in the medium term.

The BoE minutes showed that policymakers are concerned about slowing GDP and few additional reductions to unemployment;

‘The recent news in the macroeconomic data has been mixed and relatively limited.

Global growth has remained strong. Domestically, some activity indicators suggest GDP growth in Q4 might be slightly softer than in Q3.

The measures announced in the Autumn Budget will lessen the drag on aggregate demand stemming from fiscal consolidation, relative to previous plans.

The labour market remains tight, and surveys suggest this will continue’.

Looking at Carney’s options in the future, Nick Dixon of Aegon has said;

‘This week’s [UK] inflation figures will make uncomfortable reading for Mark Carney, given previous predictions that inflation had already peaked.

With pressure on for wage increases and political demand for looser fiscal policy, the governor will worry about the potential for high inflation to become embedded’.

Striking an extremely hawkish tone with regards to future BoE policy decisions, Angus Dent of Archover has said;

‘This decision [to hold base rate] ends 2017 on a damp squib. The Bank of England’s approach is too slow.

We need a bolder approach to monetary policy in the New Year.

Rather than playing wait-and-see, the Bank should emulate the US Federal Reserve and use interest rates as a tool to combat the growth in inflation currently squeezing British incomes.

At a time of low wage growth, UK households need a funding boost. It’s clear that 2018 is going to be a rocky road for the UK economy as we navigate the final stages of Brexit.

With rates staying low for the foreseeable future, UK investors and savers need to take matters into their own hands’.

In other UK news, retail sales have been reported higher than expected in November.

Sales had been tipped to show minimal growth over the month, but sales stats in all fields have risen by more than forecast.

This surprise surge was attributed to a swell of orders generated by month-specific discounts, such as Black Friday and Cyber Monday deals.

Canadian Dollar to Pound Rate Drops as Crude Oil Costs Level Out

While the Canadian Dollar has dropped against the Pound today, it has otherwise advanced against the Euro and New Zealand Dollar.

There hasn’t been much domestic data to refer to, which has left crude oil prices as the dominant factor again.

Although prices started to recover earlier on Thursday, they have since flattened out around the $56.70 mark.

The day’s sole economic stats have concerned new house prices; reportedly, cost growth has slowed by a small degree in October.

BoE Bulletin to Close Weekly GBP/CAD Trading

The week’s last UK economic news will come from the BoE again, when the bank releases its Q4 bulletin at noon on Friday.

This bulletin could provide hints about future BoE monetary policy, so is considered a high-impact data release.

Canadian Dollar traders could react to the afternoon’s manufacturing sales figure, which is expected to show a rise from 0.5% to 0.8%.

This might result in the Canadian Dollar appreciating, while rising crude oil prices could further support the CAD.

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