Canadian Dollar Buffers Losses as BoC Holds Interest Rates
The Pound Canadian Dollar exchange rate edged higher last week as an anti no-deal bill was passed through parliament, buoying optimism in the British economy and easing Brexit fears.
Tuesday’s UK Markit Construction PMI for August fell deeper into contraction territory, weighing on market confidence in the UK economy.
However, the Canadian Dollar buffered some of its losses against the Pound on Wednesday when the Bank of Canada (BoC) left interest rates at 1.75%.
The BoC remained pessimistic about escalating geopolitical tensions:
‘[US-China trade wars are] weighing more heavily on global economic momentum than the Bank had projected in its July Monetary Policy Report.’
The GBP/CAD exchange rate closed the week subdued as Canadian improving net change in employment figures for August exceeded expectations, providing some benefit to the Canadian Dollar.
CAD Outlook: Sterling Likely to Rise if No-Deal Brexit is Ruled Out by Law
Looking to the week ahead, a pivotal House of Lords vote to decide whether the anti no-deal Brexit bill becomes law means Brexit developments are likely to remain firmly in focus,.
The bill would force the Conservative Government to request an extension to Article 50 from the European Union, so we could see Sterling edge higher against the Canadian Dollar, but the extension is reliant on unanimous approval from EU leaders so a rejection of terms could prove disappointing.
Tuesday will see the release of July’s UK average earnings figures. Any improvement would prove pound-positive.
Next week is a quiet week for Canadian economic data, so global politics are likely to take centre stage for ‘Loonie’ investors. Should US-China trade tensions improve, we could see the CAD/GBP exchange rate edge higher.
09:30 UK Manufacturing Production (Jul)
09:30 UK Gross Domestic Product (Jul)
09:30 UK Average Earnings (Jul)
09:30 UK ILO Unemployment Rate (Jul)
13:30 Canadian Building Permits (Jul)