UK interest rates won’t move but what about Canada’s?

UK interest rates will stay low for longer

The “Unreliable Boyfriend” or Mark Carney as he is better known, is living up to his nick name once again. Over the course of last year the Pound rose against a basket of major currencies, including the Canadian Dollar. GBP/CAD prices peaked at 2.0940 in August last year, rising from around 1.80 a year earlier. The main reason for this rise was speculation that the Bank of England would raise interest rates. This has been predicted many times over the past few years and Mr Carney’s constant changing of stance on this, has led to his Unreliable Boyfriend title in the press.

We have witnessed huge values wiped off stocks, due to the middle east crash recently and with china’s (the UK’s second largest trade partner) economy slowing and the UK’s largest trade partner Europe, still struggling massively, this could weigh heavily on Sterling for some time to come.

This means that once again Mr Carney has been forced to admit that the central banks forecasts of rising inflation have unravelled, therefore interest rates will have to remain at the record low for some time to come.

Mr Carney also warned there will be further woes caused by the problems in China and with Oil prices not looking likely to recover any time soon, could continue to cause problems for Sterling in the future.

Canadian manufacturing sales could make or break the Loonie

With many predicting the price of Oil will continue to fall rather than recover any time soon, it could spell doom for the Canadian economy. Tomorrow we have the most important day of the week for the Loonie. We start with Manufacturing sales and Wholesale sales. These will be very important and more closely watched than normal.

Canada’s only chance of recovery while the Oil prices are so low is its manufacturing sector. In the past, this has been able to bridge the gap when oil prices have fallen. However, with such severe falls in oil and commodities prices and now huge competition from Mexico, it is more important than ever, that the figures are positive. If the numbers miss estimates, we could see the Canadian Dollar decline rapidly, as this could point towards the CAD struggling against its counterparts in the long term.

Canadian interest rate decision

While the chance of an interest rate hike is falling in the UK, the chances of a rate cut in Canada amounts. It is unlikely that the Bank of Canada will reduce interest rates this month but this hasn’t stopped the rumours. If the central bank do cut rates, we will see the Canadian Dollar fall against all of its currency crosses. It is more likely however it will be the press conference after that will cause the volatility. Any hints towards a move of interest rates will cause the rates to move.

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Richard BeaumontWritten by:
Richard Beaumont
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