GBP/CAD Exchange Rate Muted amid UK Financial Worries
The Pound Canadian Dollar (GBP/CAD) exchange rate was trapped in a narrow range on Monday despite concerns over the UK’s public finances.
At the time of writing GBP/CAD traded at around CA$1.7775, virtually unchanged from Monday’s opening rate.
Pound (GBP) Hobbled amid Financial Doubt
The Pound (GBP) was undermined on Monday, slipping against the majority of its peers, following reports of a £20bn gap in the UK’s public finances.
With the UK’s new Chancellor Rachel Reeves expected outline plans to cut public spending in order to fill a £20bn ‘black hole’, this could serve to dampen GBP exchange rates this week.
Paul Johnson, Director of the Institute for Fiscal Studies, told BBC Breakfast: ‘It is very striking that if this problem is about £20 billion big, that is exactly the scale of the national insurance cuts implemented by Jeremy Hunt just before the election. Now, if those cuts were implemented in the knowledge that there was this kind of hole, that is not good policy, to put it mildly.’
Further undermining Sterling sentiment on Monday were continued Bank of England (BoE) interest rate cut bets.
With the central bank’s decision just three days away, continued speculation over an August intrest rate cut also weighed on GBP at the start of the week.
Allan Monks of JPMorgan said: ‘We look for a [quarter percentage point] rate cut [this] week, but in a very tight 5-4 vote. A cut would feel like it’s coming despite, rather than because of, data developments since May… The case for
lower rates is far from clear.’
Canadian Dollar (CAD) Underpinned by Rebound in Oil Prices
The Canadian Dollar (CAD) climbed against the majority of its peers on Monday amid a slight uptick on oil prices following a period of falling commodity prices.
As a crude-linked currency, the ‘Loonie’ was able to firm against its peers on Monday as a rocket strike on the Golan Heights revived fears of conflict in the Middle East, marginal lifting oil prices.
An Analyst at the Commonwealth Bank of Australia told Bloomberg: ‘Concerns around China’s economy have broadly weighed on energy commodity prices. Demand concerns, though, will likely give way to rising geopolitical risks in the Middle East early this week.’
GBP/CAD Forecast: BoE Interest Rate Decision on the Spotlight
Looking ahead, the primary catalyst of movement for the Pound Canadian Dollar exchange rate for the remainder of this week will likely be the Bank of England’s upcoming interest rate decision scheduled for Thursday.
Should the central bank enact a rate cut, GBP exchange rates are likely to slip.
Turning to the Canadian Dollar, on Wednesday, the latest Canadian GDP data is forecast to show a slight downturn in May’s index, and could hobble CAD exchange rates during mid-week trade.
