Despite Canadian Dollar weakness earlier in the week, the currency experienced a fresh surge in demand after yesterday’s Bank of Canada (BoC) policy decision and the British Pound to Canadian Dollar (GBP/CAD) exchange rate plummeted again.
Since opening this week at the level of 1.7305, GBP/CAD has been trending with an upside bias as the Canadian Dollar continued to sold back from recent highs.
GBP/CAD surged earlier in the week, and on Tuesday night touched on a high of 1.7584. This was the best level for the pair in a month.
Since that high though, the Canadian Dollar has surged again and GBP/CAD plummeted yesterday. At the time of writing on Thursday, GBP/CAD is trending in the region of 1.7390.
Investors have been hesitant to buy the Pound too much this week, as the British currency’s outlook has not changed much.
While optimism persists about the Pound and the UK outlook, there is speculation that much of the optimism has already been priced into Sterling.
This week’s UK data was either mixed or unsurprising, leaving no notable change in the Pound’s appeal or outlook.
UK job market data was mixed, and inflation fell a little short of expectations. Any speculation of a more hawkish Bank of England (BoE) has been doused slightly for now.
However, the bigger cause of GBP/CAD movement this week has been the Canadian Dollar’s own large movements, on a combination of global and domestic news.
At the beginning of the week, investors sold the Canadian Dollar as a rise in coronavirus cases across Asia made investors hesitant to take risks or buy commodities. This led to a plunge in prices of oil, Canada’s biggest export, and the Canadian Dollar weakened as well.
In the middle of the week though, the Bank of Canada (BoC) held its April policy decision.
The bank’s policy moves were largely expected, leaving rates frozen and slightly easing its quantitative easing (QE) plans.
Most notably though, the BoC upgraded its growth outlook, and even signalled that it could start hiking Canada’s interest rates as soon as 2022.
This was a surprise to markets and caused a surge in demand for the Canadian Dollar.
GBP/CAD could slide further towards the end of the week if the Canadian Dollar remains appealing. If commodity prices rise and markets keep betting on a more hawkish Bank of Canada, the Canadian Dollar could keep climbing.
However, the Pound could strengthen if tomorrow’s UK data impresses investors.
UK retail sales and PMI projection data is due tomorrow. It could bolster market appetite for Sterling if it impresses.
Tomorrow’s Canadian wholesale sales report is unlikely to be too influential to the Canadian Dollar’s movement.
Next week’s Canadian data, including retail sales and growth results, are more likely to be influential to the Pound to Canadian Dollar (GBP/CAD) exchange rate.