GBP/CAD Exchange Rate Falls on BoE Emergency Rate Cut
The Pound Canadian Dollar (GBP/CAD) exchange rate fell by over -0.5% today after the Bank of England (BoE) cut its interest rates to a record-low of 0.1% to fight the Covid-19 economic fallout. The pairing is currently fluctuating around CA$ 1.6693.
Ivan Petrella, an associate professor of economics at Warwick Business School, comments:
‘The fact that the Bank of England is ready to step up its efforts to stimulate the economy gives the UK a clear advantage over countries in the EU.’
‘It is now clear that the prolonged impact of a shut-down to the economy, coupled with the large fall in demand and related uncertainty, will most likely lead to a severe downturn unless we see more drastic and decisive policy actions.’
However, Sterling traders are remaining cautious after the Pound fell to record-lows against the US Dollar and the Euro yesterday. Fears are also growing over a possible recession for the British economy going ahead.
With global economic uncertainty mounting, the outlook to the increasingly fragile Pound continues to darken.
Canadian Dollar (CAD) Improves as Canada Ramps Up Stimulus Measures
The Canadian Dollar’s (CAD) sell-off has begun to ease off today in spite of sinking oil prices and growing uncertainty over the global coronavirus pandemic.
Last night saw Canadian President Justin Trudeau announce a fiscal jolt worth 3% of Canada’s GDP to aid the economy through the nation’s ongoing economic crisis. Mr Trudeau also promised that there would be ‘more to come’.
As a result, the ‘Loonie’ has begun to trade higher on hopes of a near-term recovery for the Canadian economy. However, with oil prices falling and Canada’s economic outlook being uncertain, the Canadian Dollar is likely to face further volatility in the coming days.
Yesterday saw the Canadian Dollar fall to its lowest level since 2003, leaving analysts predicting a rate cut from the Bank of Canada.
Royce Mendes, Senior Economist at CIBC Capital Markets, commented:
‘We expect the Bank of Canada to further reduce the target interest rate, taking it down in the coming days or weeks to 0.25 per cent, the low of the last recession.’
GBP/CAD Outlook: Could Sterling Sink on UK Recession Fears?
Pound (GBP) investors will be paying close attention to the British economy this week. If the Bank’s recent stimulus measures stabilise the UK’s sensitive economy, we could see Sterling begin to claw back some of its losses.
The Canadian Dollar (CAD) will remain sensitive to oil price fluctuations. Any indications that one of Canada’s major commodities could dwindle in value would prove CAD-negative.
Looking ahead, the GBP/CAD exchange rate is likely to remain subdued as the UK economy continues to remain on the brink of a recession. As a result, Sterling traders will be watching how the economy performs following the BoE’s recent measures.
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