GBPCAD exchange rates continue their climb following concerns around oil prices. Will the BoC keep interest rates on hold at their next meeting?

Poor GDP figures offer best time to buy CAD in 4 weeks

The Canadian Government have released their Gross Domestic Product (GDP) figures for the second quarter which showed the largest loss since the Global economic crisis in 2009, shrinking by 1.6%. In the first quarter of this year the economy grew by 2.5%, but the Wildfires in its oil sands regions reduced its production capabilities. The fires weren’t solely responsible for the fall in growth however, as exports of vehicles and parts were also down 6% and consumer goods exports fell at the fastest pace in 13 years by 7%.

As production returns, the Bank of Canada are expecting growth to return over the remainder of the year, but lower oil prices will continue to weigh on the Canadian economy. Manufacturing PMI data released yesterday also declined in August compared to July, but they too are expected to recover in the second half of 2016. This week’s negative data, combined with positive UK Manufacturing data caused GBP/CAD to strengthen by over 1.5% and provided the best opportunity to buy CAD in 4 weeks.

Will the Bank of Canada change Interest Rates next week?

The next key date to watch out for is on Wednesday with the Bank of Canada’s Interest Rate decision at 3pm. It is widely anticipated that the BoC will keep rates unchanged at 0.5%, causing economists to push back their forecasts for a rate hike until at least 2018. The BoC cut rates twice last year to try and outweigh the impact of low oil prices, and it had been previously expected that the bank would next raise interest rates to 0.75% in the last quarter of 2017. However, some analysts are expecting the next move to be a rate cut as the economy is lacking momentum and a cut could stimulate this.

Interest rate movements have a huge influence on exchange rates, for example when the Bank of England cut rates last month, GBP/CAD fell by over 2% in only a matter of hours. If you have a Canadian Dollar transfer over the coming months, we have a number of options to help limit your exposure to these market movements. Please get in touch with one of our brokers to find out more information on how we can help.


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