At the time of writing, GBP/CAD traded at around CA$1.7096, a fall of roughly 0.3% from Thursday’s opening rates.
The Pound (GBP) came under pressure on Thursday in the wake of the latest interest rate decision from the Bank of England.
While the central bank kept interest rates unchanged at 5.25% as was widely expected, the Monetary Policy Committee split 7-2 in terms of voting for unchanged rates.
With two members of the MPC having voted for a rate cut, this prompted speculation that the BoE may be inching closer to an interest rate cut in the near future.
Furthermore, while the BoE stated that signs were encouraging but not enough for an immediate rate cut, the accompanying policy summary showed deliberations over the tightness of the BoE’s policy.
The report stated: ‘The Committee had judged since last autumn that monetary policy needed to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipated. The Committee recognized that the stance of monetary policy could remain restrictive even if Bank Rate were to be reduced, given that it was starting from an already restrictive level.’
As this prompted speculation that the BoE had begun to lay the groundwork for its first interest rate cut, the Pound weakened against most major peers on Thursday.
Canadian Dollar (CAD) Exchange Rates Unmoved by Oil Price Increase
Despite an increase in oil prices, the Canadian Dollar (CAD) struggled to capitalize on this advantage during Thursday’s session.
The crude sensitive ‘Loonie’ would normally gather pace when prices increased, but a lack of impactful macroeconomic data sapped sentiment towards the currency, which limited its movements.
Oil prices began to strengthen on Thursday following news that Chinese imports of crude oil had risen by 5.45% in April on a yearly basis. This was likely due to refiners bolstering supplies ahead of the five-day Labor Day weekend.
While this did mark a slip from the previous year’s import levels, investors believe demand is likely to increase later in the year.
Lin Ye, analyst at Rystad Energy, commented: ‘China’s crude buying slowed down on strengthened crude oil prices and weakened domestic diesel demand. China’s crude demand is expected to be supported by larger export quota this year and new refinery start-up later this year.’
This prompted crude oil prices to increase by roughly 0.6% at the time of writing, which may have served to underpin the Canadian Dollar.
Pound Canadian Dollar (GBP/CAD) Exchange Rate Forecast: UK GDP Data in Focus
Looking beyond the Bank of England’s interest rate decision for the Pound, investors may turn their attention towards the latest UK GDP growth data, due for publication on Friday.
In the first quarter of 2024, markets anticipate the UK economy to have expanded by 0.4% over the previous quarter, which would mark a clear economic recovery for the UK. By indicating that the UK had exited a recession, the Pound could strengthen on the back of this information.
However, any gains for Sterling could be offset by continued analysis of the latest interest rate decision from the BoE, as markets are likely to keep analyzing the latest moves from the central bank through to the end of the week’s session.
For the Canadian Dollar, investor attention is likely to focus on the latest unemployment rate, due for publication on Friday.
In April, the Canadian unemployment rate is forecast to have ticked higher from 6.1% to 6.2%, which could weaken the ‘Loonie’ by suggesting growing slack in the Canadian jobs market.
Elsewhere, oil prices may also drive the Canadian Dollar. If prices continue to recover, CAD exchange rates could gather support from investors.
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