British Pound to Canadian Dollar (GBP/CAD) Exchange Rate Gains Amid Inflation Data
The British Pound to Canadian Dollar (GBP/CAD) exchange rate is currently trading at 1.8425. The Pound is dominating the ‘Loonie’ after a positive day for UK data and anticipation rising ahead of the Bank of Canada’s interest rate decision on Wednesday.
If you're looking to make an international money transfer, we recommend TorFX.
The Canadian Dollar to US Dollar exchange rate has recently been trading in the region of 0.94 cents in the currency market which economists have called ‘uncomfortably’ high.
However the ‘Loonie’ has softened slightly against its major peers on Tuesday awaiting the Bank of Canada’s interest rate decision due to be announced on Wednesday at 15:00 GMT.
The ‘Loonie’ has also depreciated due to the release of poor employment statistics last week showing that 9,400 jobs in the Canadian economy had diminished last month.
The ‘Loonie’ was subject to the sharpest decline in July following the negative employment data, since March, softening by 0.8%.
Recent fears have surfaced that a strong ‘Loonie’ isn’t maintainable in the currency market, as it leaves exporters at a disadvantage.
Forex expert, Camilla Sutton, suggested: ‘The BoC risk is that governor Poloz strikes a cautious tone, highlighting that a strong (currency) risks weighing on important economic fundamentals.’
As Canada awaits the BoC’s interest rate decision which is currently forecast to remain at 1.0%, speculation increases as to the central bank’s actions.
Representative for RBC Capital Markets in Canada, George Davis, commented: ‘We do think the risks are going to be toward a dovish central bank and toward Canadian-Dollar weakness.’
Conversely the Great British Pound’s interest rates are also popular to speculation after Tuesday has seen a string of positive data for the UK.
The UK Consumer Price Index has shown inflation rise by 1.9%, the most it’s risen since January 2014.
European foreign exchange expert, at the London branch of the Bank of Montreal, Stephen Gallo, has speculated about the timing of UK interest rate hikes, stating: ‘That [inflation data] keeps the notion of a rate hike before the end of the year firmly on the table.’
Moreover strategist for the Royal Bank of Canada in London, Adam Cole suggested: ‘It [inflation data] should work towards lifting UK rate expectations, which is clearly why Sterling is taking it positively.’
However with increasing pressure growing on the Bank of England for the immanency of interest rate rises in the UK, the governor for the Bank of England, Mark Carney, has previously stipulated that rises will be slow and gradual.
Chief economist for the British Chambers of Commerce (BCC), David Kern has defended the Bank of England’s decision regarding interest rates, stating: ‘The increase in inflation in June should not spark a knee jerk reaction on interest rates by the Monetary Policy Committee (MPC). Monthly fluctuations in the inflation figures are normal and there are no significant upward pressures, particularly as wage growth remains weak. The UK recovery is still not secure and growth amongst UK businesses must be fostered prior to any future interest rate rises.’
It appears in the meantime that the Pound will dominate in most major currency pairs, off the back of such favourable data; however Wednesday could boost Sterling further if Average Weekly Earnings and Employment Change data proves favourable.
Canada meanwhile has seen positive data on Tuesday regarding home sales, with sales rising in 50% of the local housing markets.
However until the release of the Canadian interest rate decision, the ‘Loonie’ seems likely to trade lower against other majors including the bullish Pound.