The Pound Canadian Dollar (GBP/CAD) exchange rate slumped to a two-week low on Thursday after the Bank of England narrowly voted to leave interest rates unchanged.
Pound to Canadian Dollar (GBP/CAD): 1.85336 (-0.65%)
Euro to Canadian Dollar (EUR/CAD): 1.61388 (+0.03%)
Dollar to Canadian Dollar (USD/CAD): 1.36812 (+0.08%)
DAILY RECAP:
The Pound (GBP) plunged on Thursday after the Bank of England came surprisingly close to cutting interest rates.
Markets had broadly expected the bank to leave rates unchanged, with City economists having predicted a 7–2 split, as UK inflation accelerated to 3.4% in December, still well above the BoE’s 2% target.
However, the decision was shockingly close. Four of the nine members of the Monetary Policy Committee voted to cut interest rates, leaving Governor Andrew Bailey to cast the deciding vote in favour of no change.
This dovish vote split caught GBP investors off guard, leading to a sharp depreciation in the Pound as markets scrambled to price in a faster pace of policy easing in the months ahead.
Meanwhile, the Canadian Dollar (CAD) strengthened against the sliding Pound, despite a lack of Canadian economic data.
Steady oil prices did little to influence the crude-linked ‘Loonie’ either way, although this allowed CAD to climb against GBP.
Near-Term GBP/CAD Forecast: Canadian Jobs Data in Focus
Looking forward, Canada’s latest jobs data could drive most GBP/CAD movement on Friday.
Economists expect Canadian unemployment to remain unchanged at 6.8%, while the employment change figure is forecast to show a 7,000 increase in the number of people in work. If the data prints as anticipated, the Canadian Dollar could catch bids.
However, CAD could trim any gains later in the afternoon with the release of the latest Ivey PMI. Markets expect the index to have dipped into contraction territory in January.
Meanwhile, any shifts in crude prices could infuse the oil-linked ‘Loonie’ with volatility.
As for the Pound, UK economic data is in short supply at the end of the week. Therefore, GBP investors may look to British political headlines for fresh impetus.
Prime Minister Keir Starmer is under intense pressure over his appointment of Peter Mandelson as US ambassador, despite knowing about his friendship with Jeffrey Epstein.
This latest crisis has fuelled speculation that Starmer’s days in Number 10 could be numbered. Any new revelations could reinforce fears of political instability and therefore weigh on GBP.
