GBP/CAD is confidently extending the uptrend that started on November 27. Yesterday, the quotation noted a pump and dump caused by investors’ reaction before and after the Bank of Canada’s interest rate decision.
At the moment, one British pound buys 1.7317 Canadian dollars, up 0.12% as of 10:27 AM UTC. Yesterday, the price updated the highest level since May of this year before retreating.
The Loonie found some support after the Bank of Canada (BoC) decided to keep the interest rate at 1.75%, stating that the global economy was getting back on track despite the trade tensions.
Still, the central bank said that the trade wars were the main threat to its economic outlooks. However, investors didn’t pay much attention to those statements as it was a commonly understood matter.
The BoC has maintained the rates unchanged since October 2018, having to cope with the pressure coming from the US Fed and the European Central Bank, whose easing measures have resulted in cheaper national currencies. A stronger Canadian dollar is challenging for an export-oriented economy like Canada. Nevertheless, the central bank doesn’t seem to be ready to cut the rates soon, stressing that much depends on its assessment of the impact caused by trade conflicts.
The bank concluded:
“There is nascent evidence that the global economy is stabilizing, with growth still expected to edge higher over the next couple of years.”
And it’s not only about the global economy, the BoC is confident about the local economy as well.
Andrew Kelvin, chief Canada strategist at TD Securities, commented:
“If you read how they describe the domestic economy, it is very broadly positive.”
The overwhelming majority of economists expected the BoC to hold rates steady yesterday. However, many anticipate the bank to cut lending rates in the first quarter of next year.
While the CAD has strengthened against majors, the British pound is still stronger as markets hope that UK Prime Minister Boris Johnson’s Conservative Party will win the election on December 12, thus opening the door to a smooth Brexit process.
Besides, the Loonie is under pressure as China reiterated that the US had to rollback tariffs in order to reach an interim deal. The Chinese commerce ministry said earlier today:
“The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly.”