February 5, 2021 – Written by John Cameron
The Pound to Canadian Dollar exchange was rangebound today as Sterling began to lose momentum following on from the BoE interest rate decision yesterday.
At the time of writing the pair is currently trading at around $ 1.7550.
Pound (GBP) Muted as Bank of England Holds Interest Rates
The Pound was muted against the Canadian Dollar today following on from Thursday’s Bank of England (BoE) February policy decision.
As expected, the bank left rates unchanged at 0.1% and lowered its 2021 Q1 growth forecasts.
The more upbeat news for investors, however, was the downplaying of potential negative interest rates. Although banks were told to prepare for the possibility of negative rates within six months, the BoE clarified they were not imminent.
There was positive coronavirus news coming from the UK, as the R value has fallen to 0.7-1 across the country.
The government commented on the new stats saying:
‘These estimates mean we are now confident the epidemic is shrinking across England, though it remains important that everyone continues to stay at home in order to keep the R value down.’
This follows on from news that the AstraZeneca vaccine has been found to be effective against the UK variant of the virus first detected in Kent.
Canadian Dollar (CAD) Supported by Better-Than-Expected Trade Deficit
The Canadian Dollar was supported today by some better-than-expected trade deficit data.
Canada’s trade deficit narrowed to CAD$ 1.7 billion in December of 2020, well below market forecasts of a CAD$ 3 billion deficit. It is the lowest trade deficit since June of 2020, as exports rose 1.5% to CAD$ 47.3 billion.
Rising oil prices are also supporting the ‘Loonie’ today.
However, the Canadian Dollar’s gains were offset as the country struggled against employment change data which was well above market forecasts.
The economy shed 213,000 jobs in January due to ongoing public health restrictions from the coronavirus pandemic, this comes as the unemployment rate rose to 9.4%, higher than the 8.9% forecast.
Pound to Canadian Dollar Outlook: Coronavirus Developments in Focus
The GBP/CAD exchange rate will continue to be dictated by any further coronavirus developments, with any indication that UK lockdown restrictions are to be eased sooner rather than later proving positive for Sterling.
Looking to the end of next week, GBP investors will be looking towards GDP data releases from the end of 2020, which is forecast to show a further contraction in the economy due to national coronavirus restrictions, which could cause trouble for the Pound.
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