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GBP/CAD Tanks as Bank of England (BoE) Interest Rate Hike Bets Fall

Last week’s high: C$1.7980

Last week’s low: C$1.7698

Poor UK Growth Data Causes Pound to Canadian Dollar Exchange Rate Selloff

The Pound to Canadian Dollar exchange rate initially saw modest gains last week, but following Friday’s disappointing UK growth projections the Pound plunged and GBP/CAD ended the week lower.

As UK GDP growth came in at a surprisingly anaemic 0.1% quarter-on-quarter and a disappointing 1.2% year-on-year, Bank of England (BoE) interest rate hike bets plunged and investors sold the Pound. Markets no longer expect the BoE to hike interest rates in May.

The Canadian Dollar was able to hold its ground against Sterling for most of the week and easily advanced on Friday. This was because while NAFTA renegotiation talks were reportedly difficult and going slowly, investors still expect them to succeed rather than collapse.

CAD Outlook: Growth Could Help Canadian Dollar to push GBP/CAD Lower

Unless upcoming UK PMI data is particularly impressive, Bank of England (BoE) interest rate hike bets are likely to remain low and the Pound’s potential for gains is limited.

Perhaps if UK services PMI data on Thursday comes in well above expectations, investors will become hopeful that Britain’s economy is improving in Q2 2018 and this could boost BoE bets again.

However, if UK data fails to impress it is more likely that BoE comments or Brexit developments will be driving Pound movement.

GBP/CAD could see further losses in the coming week instead, especially if Tuesday’s Canadian growth report from February impresses investors. Canadian growth is forecast to have risen from -0.1% to 0.1% in February, but if it comes in higher GBP/CAD is likely to fall.

 

Key Events

1st May

09:30 UK BoE Consumer Credit

09:30 UK Manufacturing PMI

13:30 Canadian Growth Rate

14:40 Canadian Manufacturing PMI

2nd May

09:30 UK Construction PMI

3rd May

UK Local Elections

09:30 UK Services PMI

13:30 Canadian Trade Balance

4th May

13:30 Canadian Ivey PMI

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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 Trader
T: 01442 892 065

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