GBP/CAD is sticking to the bullish stance in early trading on Thursday. The pair is currently trading at 1.7277, up 0.11% as of 08:10 AM UTC.
Yesterday, the price surged 1.29%, which was the biggest daily gain since October 10 of last year.
The Bank of Canada (BoC) left the interest rates unchanged yesterday, in line with analysts’ expectations. However, the central bank hinted to an upcoming rate cut if the recent slowdown in the economic growth persists. Some investors are pricing in a potential rate cut as soon as this spring.
The BoC has resisted the pressure from the US Fed, the European Central Bank, and other major central banks, which cut their rates several times last year, implementing stimulus measures to support their economies.
However, BoC Governor Stephen Poloz said that the door was open to a rate cut.
“But it hinges on how the data evolve from here,” he added.
Economists doubled their bets on the chance of a rate cut by April from 20% to 40%.
The BoC reduced its annual growth outlook for the fourth quarter to 0.3% from 1.3% in October. The forecast for the first quarter this year was pegged at 1.3%.
Royce Mendes, Chief Economist at CIBC Capital Markets, commented:
“[The BoC] is leaving open the possibility that the economy surprises to the downside. There’s very little margin for error in that Bank of Canada base case forecast and they appear to have at least opened the door to a possibility of rate cut in the spring.”
Shortly before the BoC’s interest rate decision, Statistics Canada said that wholesale trade, which is an essential contributor to the monthly GDP performance, declined 1.2% in November. Analysts expected a slight monthly decline of only 0.3%.
Also, Canada’s consumer prices index (CPI) maintained steady at 2.2% last month, supported by an increase in energy prices, which rose 5.5% year-on-year. However, the core inflation declined more than expected.
The pound surged against its Canadian counterpart also because of positive data at home. The Confederation of British Industry said that optimism in UK factories rose to the highest level in 6 years.
