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GBP/CAD Exchange Rate Slides as BoC Adopts Optimistic Outlook

Last week’s high: C$1.7132

Last week’s low: C$1.6992

Signs of BoC Optimism Boost Canadian Dollar

Demand for the Canadian Dollar picked up sharply over the course of the last week after the Bank of Canada (BoC) sounded a more optimistic note on the economic outlook.

As the BoC left interest rates on hold at its May policy meeting, as anticipated, the accompanying commentary indicated a belief that the recent slowdown is already easing.

This positive outlook was backed up by Friday’s gross domestic product data, which bettered forecasts with a quarterly growth rate of 0.5%.

However, the weakness of the GBP/CAD exchange rate was limited ahead of the weekend thanks to the latest developments in US trade policy.

The surprise announcement that the US will impose tariffs on Mexican imports provoked a sharp increase in risk aversion, denting the risk-sensitive Canadian Dollar.


CAD Outlook: Canadian Dollar Vulnerable to Manufacturing Sector Contraction

CAD exchange rates could come under further pressure this afternoon if May’s manufacturing PMI remains in a state of contraction.

Signs of continued weakness within the Canadian manufacturing sector may undermine recent confidence, exposing the Canadian Dollar to another bout of selling.

If the economy appears on course to lose momentum in the second quarter, unwinding some of the improvement of the first, this could weigh heavily on CAD exchange rates.

Political jitters look set to keep the Pound on the back foot, meanwhile, as markets continue to speculate over Theresa May’s most likely successor as prime minister.

The latest round of UK PMIs could also put pressure on the GBP/CAD exchange rate if growth fails to pick back up on the month.

If the services PMI moves closer to contraction territory this could see the Pound trending sharply lower across the board.

Key Events

3rd June

09:30   UK Manufacturing PMI

14:30   Canada Manufacturing PMI

5th June

09:30   UK Services PMI

6th June

13:30   Canada Trade Balance

7th June

13:30   Canada Unemployment Rate


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


Alastair Archbold

Foreign Exchange Manager

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