The Pound-Canadian Dollar rate could strengthen if Andrew Bailey reinforces BoE hike expectations, while softer Canadian producer prices may weigh on the Loonie.
The Pound to Canadian Dollar (GBP/CAD) exchange rate was rangebound on Wednesday, following the publication of the UK’s latest consumer price index.
At the time of writing, the GBP/CAD exchange rate was trading at CA$1.8809. Almost unchanged from the start of Wednesday’s session.
Pound to Canadian Dollar (GBP/CAD): 1.881279 (+0.01%)
Euro to Canadian Dollar (EUR/CAD): 1.577669 (-0.10%)
Dollar to Canadian Dollar (USD/CAD): 1.40436 (-0.16%)
DAILY RECAP:
The Pound (GBP) traded with modest support on Wednesday as the UK’s latest CPI figures printed above forecast.
According to data published by the Office for National Statistics (ONS), UK inflation accelerated from 3.1% to 3.5% in September, outpacing forecasts that it would only rise to 3.4%, while also reaching an 11-month high.
The rise in inflation was primarily linked to surging energy prices, although hotter-than-expected core inflation suggests price pressures are becoming more broad-based.
September data further reinforces bets the Bank of England (BoE) will kick-start a new hiking cycle at its next meeting in November.
Likely capping Sterling’s upside potential was the UK’s accompanying borrowing data, with a larger-than-expected increase in the public deficit last month, further limiting the fiscal headroom available to Chancellor John Healey in his upcoming budget.
The Canadian Dollar (CAD) edged higher on Wednesday as a fresh rally in global oil prices provided a welcome boost for the commodity-linked currency.
Brent crude climbed to a new five-month high this week amid concerns over a potential escalation of tensions in the Middle East.
While diplomatic efforts to contain the conflict triggered a pullback in prices late on Tuesday, Brent subsequently moved higher again on Wednesday as supply concerns persisted.
Near-Term GBP/CAD Forecast: BoE Bailey Remarks to Lift Sterling?
Turning to the second half of the week, the next catalyst of movement for the Pound to Canadian Dollar (CAD/USD) exchange rate will be scheduled remarks from BoE Governor Andrew Bailey.
If Bailey concedes that rising inflationary pressures will push the BoE to tighten monetary policy in the coming months, Sterling is likely to firm.
Meanwhile, Canada’s latest producer price index could weigh on the ‘Loonie’ if a slowdown in factory gate prices last month, dampens Bank of Canada (BoC) rate hike bets.
Our currency coverage draws on live market data, official economic releases and published bank research.
