After the Bank of Canada unexpectedly raised interest rates earlier in the week, the Canadian Dollar has continued to reside below the 1.60 mark against Sterling. The Bank of Canada have now raised rates on two occasions in the last three months, which is the main reason the GBP/CAD rate has dropped nearly 20 cents in 4 months. Now that the Canadian central bank has moved interest rates twice this year, there is potential for a third if economic data continues to improve.
Oil Price to Bring More Good News
The Canadian economy is dictated by the price of oil, their largest export. Therefor when the price of oil is on the up there are generally positive movements for the Canadian Dollar. After the devastation from Hurricane Harvey in the US over the last week, oil production was majorly affected with many oil refineries having to close. Due to the supply of oil dwindling in the last few days, the price has risen which will be reflected in Canada’s economic data in the next few months, as bottom line profits will be up.
What’s next for GBP/CAD?
Therefor in the short term it’s likely that the GBP/CAD rate will remain at the sort of levels we are seeing currently. It looks as though there will be little immediate strength for Sterling due to the ongoing Brexit difficulties, so I am not optimistic that GBP/CAD will move back towards 1.65. There is more chance that the rate could continue to work back down to the 1.55 level which would be moving towards a 4 year low.
There is Canadian Unemployment data released later today, which if positive could see further strength for the Loonie. If you’re a Canadian Dollar seller it would be pertinent to look out for data releases coming out in the short term.