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Bank of England (BoE) Interest Rate Hike Bets Keep GBP/CAD Weak

Last week’s high: C$1.7707

Last week’s low: C$1.7383

Canadian Dollar Holds Gains Against Weak Pound as Oil Prices Rise

Despite a surprise deepening in Canada’s trade deficit in March, the Canadian Dollar remained sturdy enough at the end of last week to hold its gains against a weak Pound.

GBP/CAD fell at the beginning of the week as UK PMI data indicated that Britain’s economy was still performing weaker than expected at the beginning of Q2 2018. With Bank of England (BoE) interest rate hike bets for May now essentially off the table, investors had little reason to buy the Pound.

The Canadian Dollar was able to hold its best levels against Sterling due to a solid Canadian growth report from February, as well as stronger oil prices.

Canada’s economy grew at 0.4% in February, beating the forecast 0.3%.

Prices of oil, Canada’s most lucrative commodity, saw strong performance towards the end of the week which also helped to support the commodity-correlated Canadian Dollar.

CAD Outlook: Bank of England and Canadian Job Results Next Week

The Canadian Dollar may be able to keep gaining against the Pound in the coming week if Canadian ecostats continue to impress, especially if global trade developments make risky commodity correlated currencies like the Canadian Dollar more appealing.

Investors will be focused on continued developments on trade between the US and China, as well as potential progress on NAFTA renegotiations.

As for data, the most influential Canadian data due for publication next week will be the nation’s April job market results, due on Friday.

The Pound, on the other hand, will react to the tone the Bank of England (BoE) takes in its May policy decision on Thursday. The bank is no longer expected to hike UK interest rates, and if policymakers show a notable shift towards dovishness the Pound is likely to see another week of poor performance.

Key Events

8th May

13:15 Canadian Housing Starts

9th May

13:30 Canadian Building Permits

10th May

09:30 UK Industrial and Manufacturing Production

09:30 UK Balance of Trade

12:00 Bank of England Policy Decision

13:00 UK NIESR GDP Estimate

13:30 Canadian New Housing Price Index

11th May

13:30 Canadian Job Market Report

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To keep up to date with the Canadian Dollar, visit the CAD blog in our Currency News section.

Alastair Archbold

Currency Dealer

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