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Pound to Canadian Dollar (GBP/CAD) Exchange Rates Steady as BoC Holds Interest Rates at 0.25%

June 3, 2020 - Written by John Cameron

GBP/CAD Exchange Rate Rangebound as Risk-On Markets Fail to Buoy Canadian Dollar

The Pound to Canadian Dollar (GBP/CAD) exchange rate held steady today, with the pairing currently trading around CA$1.69.

Today saw the Bank of Canada (BoC) hold its interest rates at 0.25%, effectively dispelling any concerns that the bank could take interest rates lower to held boost the Canadian economy.

The BoC said in its statement:

‘Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery.’

‘As market function improves and containment restrictions ease, the Bank's focus will shift to supporting the resumption of growth in output and employment.’

The Canadian Dollar (CAD) has also continued to benefit from risk-on markets today, with investors betting on a swifter-than-expected global economic recovery as nations continue to ease Covid-19 lockdown measures and reopen their economies.

Pound (GBP) Steady as UK Services Fail to Impress UK Markets

The Pound (GBP) held steady against the ‘Loonie’ following today’s release of the final UK Services PMI for May. Despite the figure rising from 27.8 to 29, the UK’s largest sector has remained deeply lodged in contraction territory.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented:

‘As restrictions are eased, there is still extreme uncertainty about how the pandemic will pan out. Continued anxiety about the coronavirus means consumer spending may not be the wind beneath the sails of any immediate return to pre-virus economic activity.’

Meanwhile, Sterling traders are becoming increasingly jittery over the fourth leg of UK and EU post-Brexit negotiations.

Today also saw Andrew Bailey, the Governor of the Bank of England (BoE), warn banks to begin preparing for a possible no-deal Brexit later on this year.
Mr Bailey commented:

‘As we have said previously, the possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months.’

GBP/CAD Outlook: Could Weak Canadian Trade Data Weigh Down the ‘Loonie’?

Canadian Dollar (CAD) traders will be awaiting tomorrow’s Canadian trade data for April. Any signs of Canada’s trade figures improvement would prove CAD-positive.

Tomorrow will also see the BoC’s Deputy Governor Toni Gravelle deliver a speech. Any dovish comments about the Canadian economy could hold back some of the Canadian Dollar’s gains.

The GBP/CAD exchange rate will continue to be driven by global market sentiment and oil prices this week. If oil prices continue to rise and global risk sentiment improves, then we could see the ‘Loonie’ head higher.

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