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Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Rises as BoC Downwardly Revises 2019 Growth Estimate

April 24, 2019 - Written by John Cameron

Pound Canadian Dollar (GBP/CAD) Exchange Rate Rallies as BoC Leaves Rates Unchanged

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate rose and the pairing is currently trading at an inter-bank rate of CA$1.7502.

This afternoon the Bank of Canada (BoC) left interest rates unchanged at 1.75% for the fourth consecutive month.

The central bank fully abandoned its bias towards interest rate hikes as the Canadian economy struggles with a slowdown.

As a result the BoC revised down its growth estimate for 2019 to 1.2% compared to the forecast of 1.7% policymakers predicted in January, which likely dampened sentiment in the ‘Loonie’.

Added to this, the Bank’s policy statement no longer includes a reference to rates needing to increase in the future.

This could suggest that policymakers now see the odds of the Bank’s next move being equally weighted between a hike and cut depending on the economy.

In the press release, the BoC stated:

‘In Canada, growth during the first half of 2019 is now expected to be slower than was anticipated in January.

‘The Bank expects growth to pick up, starting in the second quarter of this year.’

Sterling (GBP) Rallies as Government Borrowing Hits 17-Year Low

On Wednesday morning, data from the Office for National Statistics (ONS) revealed that UK government borrowing fell to a 17-year low.

Borrowing for the 2018-2019 financial year was £24.7 billion, £17.2 billion less than the previous year.

However, despite this fall the amount was still higher than last month’s forecast from the Office for Budget Responsibility.

Chancellor Philip Hammond has promised a major cash boost for the health sector and said an end to austerity is in sight.

However, it remains unclear just how far the Chancellor can go, as Brexit uncertainty continues to cloud the economic outlook.

Pound (GBP) Rises despite Pressure for PM to Resign

The Pound rose against the Canadian Dollar despite reports that pressure is being put on the Prime Minister to resign from her position.

Last night the 1922 Committee of Backbench Tories failed to reach a consensus on a rule change.

The change would allow another motion of no-confidence to be brought against Theresa May despite it being less than a year between the previous.

While some members of the committee wanted the Prime Minister to name the date of her departure, others remained sceptical.

Many also worried about further party divisions ahead of the potential European elections on 23 May.

Pound Canadian Dollar Outlook: Will the GBP/CAD Exchange Rate Fall as Cross-Party Talks Fail to Make Progress?

Looking ahead to the rest of this week, the Pound (GBP) could fall against the Canadian Dollar (CAD) as cross-party discussions continue.

If there are further reports that cross-party talks fail to make progress and the Conservatives refuse to shift on its ‘red lines’, sentiment in Sterling could dampen.

Senior Conservatives are also due to have further discussions on whether to change party rules to allow an early leadership challenge to the Prime Minister.

If the 1922 Committee come to an agreement that could enable an early motion of no-confidence, it could create further Brexit uncertainty and cause the Pound Canadian Dollar (GBP/CAD) exchange rate to fall.

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