GBP/CAD is surging on Thursday after the Bank of England (BoE) decided to keep the interest rate unchanged. Currently, the pair is trading at 1.7301, up 0.70% as of 11:30 AM UTC. Thus the price has just updated the January peak.
Most of the gains came in the last hour, after investors found out that the central bank didn’t touch the rate. The BoE backed its decision by recent positive data showing that Britain’s economy has demonstrated signs of improvement after UK Prime Minister Boris Johnson secured a historic win the UK election.
The BoE’s Monetary Policy Committee (MPC) voted again 7-2 in favor of maintaining the rate at 0.75%. Michael Saunders and Jonathan Haskel supported lower rates for the third time in a row. Analysts polled by Reuters expected that 3 MPC members would vote for an interest rate cut.
Nevertheless, the BoE is still open for the first rate cut since 2016. However, this will happen after Governor Mark Carney leaves his role in March to his successor, Andrei Bailey.
The central bank said in its report:
“Policy may need to reinforce the expected recovery in UK GDP growth should the more positive signals from recent indicators of global and domestic activity not be sustained or should indicators of domestic prices remain relatively weak.”
The BoE said that the increase in the manufacturing and service sectors, along with the signing of phase one trade deal between the US and China, played an important role in its decision.
The bank said in its minutes:
“Since the December meeting, international developments had been positive and the most recent UK data supported the forecast of a near-term recovery in growth.”
As a result, seven MPC members, including Carney, deputy governors Ben Broadbent, Jon Cunliffe, and Dave Ramsden, chief economist Andrew Haldane, and external members Gertjan Vlieghe and Silvana Tenreyro, decided to leave the rate at 0.75%.
The central bank expects that Britain’s gross domestic product (GDP) had shown zero growth in the final quarter of 2019 when the country was struggling with political uncertainty. The outlook for 2020 was reduced to 0.8%, the slowest since the financial crisis in 2008.
Tomorrow, the UK is set to officially leave the European Union.
