Yesterday saw the Bank of Canada (BOC) interest rate decision. There was a rise from 1.25% to 1.5%. The market moves on rumour as well as fact and the hike was anticipated so we did not see significant Canadian Dollar strength. More information below on the potential impact of an interest rate hike and the reasons a it doesn't always mean a significant gain for the currency. The table below displays the range of exchange rates during trading hours on Wednesday, and the difference in return you could have achieved when selling £200,000.00 during the high and low points.
The BOC seemed to disregard the ongoing trade war surrounding the North American Free Trade Agreement (NAFTA).
A BOC spokesman spoke after the decision and stated the following.
“Canada’s economy continues to operate close to its capacity and the composition of growth is shifting.”“Exports are being buoyed by strong global demand and higher commodity prices. Business investment is growing in response to solid demand growth and capacity pressures, although trade tensions are weighing on investment in some sectors.”
This could be due to Trump’s tax cuts stoking a surge in US demand that is proving as a catalyst for Canadian exports.
Growth forecasts were also altered up to 1.8% for this year and up to 1.9% for 2018 and 2019.
This could pave the way for future rate hikes and a stronger Canadian Dollar.
The next data releases of importance from Canada will be next Friday. We will see Canadian retail sales first and I expect there to be an increase which could boost Canadian Dollar value. Following retail sales we will see the release of Canadian Consumer Price Index (CPI) data. CPI is a measure of inflation and is a key factor in future monetary policy. A rise closer toward the BOC’s 2% target could mean another rate hike could be on the cards sooner rather than later.
GBP/CAD is currently very hard to predict due to both Brexit and the NAFTA situation. At present due to the hike and positive data releases I have more faith in the Canadian Dollar than the pound at present.
If you have a Canadian Dollar requirement with Sterling and have to move short term. I would be looking to push the button in the 1.75s.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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