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Pound Canadian Dollar Exchange Rate News: GBP/CAD Rangebound as Investors Await BoC Interest Rate Decision

June 1, 2022 - Written by John Cameron

GBP/CAD Subdued Ahead of BoC Interest Rate Decision

The Pound Canadian Dollar (GBP/CAD) exchange rate is trading in a narrow range this morning as CAD investors await the Bank of Canada’s (BoC) interest rate decision. Meanwhile, the Pound (GBP) is pressured by concerns over the UK’s ongoing cost-of-living crisis.

At the time of writing, the GBP/CAD exchange rate is trading at approximately CA$1.60, virtually unchanged from this morning’s opening levels.

Canadian Dollar (CAD) Muted as BoC Interest Rate Decision Looms

The Canadian Dollar (CAD) is rangebound against the Pound this morning as CAD investors brace for the BoC’s interest rate decision later today.

Markets have largely priced-in a 50-basis point hike, which would see interest rates raise from 1% to 1.5%. As a result the Canadian Dollar may not receive much support from the rate hike itself, with the focus instead being on the bank’s forward guidance. Will a hawkish tone bolster CAD exchange rates?

Economists at Commerzbank said:

‘The market is unlikely to focus on the rate decision but the statement today. However, there are unlikely to be any surprises on that front either.

‘Only the decision in July, once the next monetary policy report is due and the projections are being adjusted is likely to provide further insights as regards the rate outlook.

‘We expect no significant momentum for the rate expectations as a result of today’s BoC meeting, so that CAD exchange rates should be unimpressed.’

Furthermore, the commodity-linked ‘Loonie’ is receiving some support from strong oil prices.

At the time of writing, WTI oil is trading at $116.73 per barrel, up by 1.75%, and Brent oil is trading at $117.52, up by 1.7%.

Oil prices are strengthening this morning as China begins easing lockdown restrictions. As the manufacturing capital of the world, the reopening of China’s economy is likely to increase oil demand.

Pound (GBP) Rangebound amid UK Cost-of-Living Anxiety

The Pound is flat against the Canadian Dollar (CAD) today amid ongoing concerns over the UK cost-of-living crisis.

The Pound has fluctuated since UK Chancellor Rishi Sunak revealed his fiscal support package last week.

The £15bn package is designed to help those in need as household incomes struggle to keep up with rising energy prices and soaring inflation.

In April, domestic inflation jumped to 9%; this is significantly higher than the Bank of England’s (BoE) target rate of 2%. Moreover, BoE Governor Andrew Bailey recently hinted that the bank was open to raising interest rates ‘in order to bring inflation down to target’.

In turn, this has bolstered BoE interest rate hike bets and aided GBP exchange rates.

However, demand for the Pound has been capped as experts warn that Sunak’s ‘energy profit levy’ may harm investments.

Furthermore, UK political uncertainty continues to limit Sterling’s appeal.

The fallout from the ‘partygate’ report continues to pressure Prime Minister Boris Johnson as the number of Conservative MPs publicly calling for him to resign continues to grow.

GBP/CAD Exchange Rate Forecast: Will BoC Deliver Hawkish Forward Guidance?

Looking ahead, the Pound Canadian Dollar exchange rate is likely to be driven primarily by the BoC interest rate decision this afternoon.

Will some hawkish forward guidance bolster CAD exchange rates?

As for the Pound, an absence of notable UK economic data could leave it exposed to UK political developments.

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