GBP/CAD Sinks on Bank of England Rate Cut Fears

Last week’s high: CA$1.658

Last week’s low: CA$1.628

Canadian Dollar Edges Higher as BoE Signals Raise Rate Cut Fears

The Pound Canadian Dollar (GBP/CAD) exchange rate was subdued at the opening of last week’s session as Prime Minister Boris Johnson downplayed the prospect of a Brexit deal.

At a UN summit in New York, Mr Johnson said:

‘I don’t wish to elevate excessively the belief that there will be a New York breakthrough. I’m not getting pessimistic – we will be pushing ahead, but there is still work to be done.’

Meanwhile, Tuesday saw the GBP/CAD exchange rate edge higher when the UK Supreme Court unanimously ruled against the legality of parliamentary prorogation. Sterling subsequently struggled, however, as agitated MPs resumed their seats the following day and chaotic scenes erupted, sending ripples of uncertainty across GBP markets.

The Canadian Dollar struggled on Tuesday when US-China trade talks confused markets with mixed signals. The Canadian economy’s reliance on international trade created market jitters as investors suspected an imminent flare-up between the world’s two largest economies.

The GBP/CAD exchange rate closed the week down by around -0.3% despite UK consumer confidence for September beating forecasts and improving from -14 to -12.

The positive data failed to impress markets in light of Bank of England (BoE) policymaker, Michael Saunders statement that interest rates could be cut as he compared the effects of Brexit to a ‘slow puncture’ in the UK economy.

CAD Outlook: Sterling Could Strengthen on Further Challenges to Hard-Brexit

Sterling traders are looking ahead to today’s release of the UK’s Q2 growth figure which is expected to improve from -0.2% to 0.5%. This could see the Pound edge higher against the Canadian Dollar.

Meanwhile, Tuesday will see the release of Canada’s September Markit manufacturing PMI, which is expected to climb out of contraction territory from 49.1 to 50.4.

Thursday could also see the Pound claw back some losses if the UK Markit services PMI show any signs of improvement for September.

Canadian Dollar investors, meanwhile, will focus on Friday’s Ivey purchasing managers index for September. Any improvement could offer support to the ‘Loonie’.

Brexit developments will continue to drive GBP/CAD exchange rates this week, with any challenge to the government’s hard-line position over Brexit likely to prove Pound-positive.

Key Events

30th Sept

09:30 UK Gross Domestic Product (Q2)

13:30 Canadian Industrial Product Price (Aug)

1st Oct

09:30 UK Markit Manufacturing PMI (Sep)

13:30 Canadian Gross Domestic Product (Jul)

14:30 Canadian Markit Manufacturing PMI (Sep)

2nd Oct

09:30 UK Markit Construction PMI (Sep)

3rd Oct

09:30 UK Markit Services PMI (Sep)

4th Oct

13:30 Canadian Ivey Purchasing Managers Index (Sep)