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Pound to Canadian Dollar (GBP/CAD) Exchange Rate Dips as Canadian Markets Brace for BoC Rate Statement

September 9, 2020 - Written by John Cameron

GBP/CAD Exchange Rate Falls as Bank of Canada is Forecast to Hold Interest Rates

The Pound to Canadian Dollar (GBP/CAD) exchange rate fell by -0.2% today, with the pairing currently fluctuating around CA$1.711.

The Canadian Dollar (CAD) edged higher as the Bank of Canada (BoC) is expected to reassure markets on its interest rate decision today. The BoC is expected to hold interest rates at record lows of 0.25%.

BoC Governor Tiff Macklem pledged back in July to keep the central bank’s interest rate at 0.25% for at least two more years.

Consequently, CAD investors are confident that the bank’s monetary policy will remain generally unchanged.

Commenting on Mr Macklem, analysts at Bloomberg said:

‘[H]e’ll almost certainly reiterate that commitment in a decision... That’s along with a promise to purchase at least C$5 billion ($3.8 billion) a week in Canadian government bonds to keep borrowing costs low across the yield curve, and to provide even more stimulus if needed.’

In other Canadian economic news, today will see the release of August’s Housing Starts figure, which is expected to dip from 245.6 thousand to 220 thousand.

As a result, we could see CAD shed some of its gains as worries increase over Canada’s economic performance in the months ahead.

Pound (GBP) Sinks as Downing Street Backtracks on Brexit Withdrawal Agreement

The Pound (GBP) struggled today following Downing Street’s backtracking on the UK-EU Brexit Withdrawal Agreement. As a result, this has soured relations between the UK and the EU, and has further made a possible no-deal Brexit more likely on December 31st.

Saxo Bank Currency Analyst John Hardy commented:

‘Boris Johnson’s aggressive Brexit stance is making waves, with sterling selling off steeply as the market begins to price in the risk that the U.K. is willing to end the Brexit transition period with No Deal rather than submit to EU terms on fisheries and especially state aid (U.K. internal investments favouring various industries).’

Meanwhile, UK markets are bracing for the announcement of stricter rules on social gatherings. Downing Street is expected to say that gatherings of more than 6 people will be banned.

Consequently, this has put pressure on restaurants and pubs, and has sparked concerns over Britain’s economic recovery.

In UK economic data, this evening will see the release of August’s RICS Housing Price Balance. Any improvement in house prices could buoy the GBP/CAD exchange rate.

GBP/CAD Forecast: Could a Hold on the BoC’s Monetary Policy Buoy the ‘Loonie’?

Canadian Dollar (CAD) investors will be awaiting tomorrow’s speech from the BoC’s Governor Tiff Macklem. However, if he reiterates his commitment to stabilise the banks’ interest rate and policy, we could see the CAD/GBP exchange rate retain its gains.

Pound (GBP) traders will be looking ahead to Friday’s release of July’s Manufacturing and Industrial Production figure. Any improvement in the UK’s industrial sector would prove GBP-positive.

The GBP/CAD exchange rate will likely remain subdued this week with Sterling investors paying close attention to Brexit developments. However, with the odds of a no-deal Brexit rising for December, the Pound is likely to continue to suffer.

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