BoE’s Emergency Rate Cut Leaves Pound Canadian Dollar (GBP/CAD) Exchange Rate Flat

March 11, 2020 – Written by John Cameron

Pound Sterling Canadian Dollar (GBP/CAD) Exchange Rate Muted as BoE Announce Surprise Rate Cut

The Pound Sterling Canadian Dollar (GBP/CAD) exchange rate remained flat, leaving the pairing trading at around CA$ 1.7734.

On Wednesday, the Bank of England (BoE) became the latest central bank to ease monetary policy through an emergency 50 basis point rate cut just before the UK spring budget.

Following the lead of central banks across the world, the BoE cut interest rates for the first time since August 2016 due to growing concern over the coronavirus outbreak.

Commenting on the bank’s decision, Moh Siong Sim, currency strategist at the Bank of Singapore noted:

‘Markets had priced in more than 25 basis points, but not the full extent of 50 basis points.

‘But it’s not a surprise in the sense that the market was kind of expecting the bank to team up with the UK government […] it looks like that 50 basis point rate cut could signal that we could expect something quite substantial from the budget itself.’

Meanwhile, outgoing BoE Governor, Mark Carney said the cut would provide relief ‘at a difficult time’.

Speaking during a news conference, Carney stated:

‘The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp but should be temporary. Activity is likely to weaken materially in the coming months. The reduction in bank rate will help bolster confidence at this difficult time.’

Canadian Dollar (CAD) Rises despite Wednesday’s Oil Price Slump

The Canadian Dollar remained flat against the Pound as oil prices gave up yesterday’s gains and fell on Wednesday.

Prices gave up earlier gains after Saudi Arabia announced plans to boost oil production for the first time in over ten years despite weaker demand.

Prices slumped after the collapse of coordinated output cuts from Russia, Saudi Arabia and others. While Russian Energy Minister Alexander Novak said Saudi Arabia’s plans were ‘probably not the best option’.

In a note, UBS analysts wrote:

‘Saudi’s shock and awe strategy suggests to us that to bring Russia back to the negotiating table, it is serious in causing severe price and revenue pain for all oil producers. Higher oil inventories will likely weigh on prices over the coming months.’

Pound Canadian Dollar Outlook: Invetsors Eye the UK Spring 2020 Budget

Looking ahead, the Pound (GBP) could suffer further losses against the Canadian Dollar (CAD) following the UK spring budget.

Chancellor Rishi Sunak is expected to announce further measures to help shield the economy from coronavirus damage. Although, if the budget disappoints, Sterling will slump.

Meanwhile, the oil-sensitive ‘Loonie’ could suffer some losses if oil prices continue to decline.

If coronavirus continues to throttle oil demand, sending oil prices lower, the Pound Canadian Dollar (GBP/CAD) exchange rate will remain flat.

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TAGS: Pound Canadian Dollar Forecasts