GBP/CAD: Loses Steam After BoC’s Rate Cut

GBP/CAD continues its bullish rally that started on Monday evening, recovering previous losses.

Currently, GBP/CAD is trading at 1.7314, up 0.52% as of 10:25 AM UTC.

BoC Slashes 50 Basis Points for First Time Since 2009

The Loonie is forced to retreat after the Bank of Canada (BoC) has finally cut its interest rate yesterday, following the US and Australian counterparts. The Canadian central bank slashed its benchmark overnight rate from 1.75% to 1.25%, amid fears that the coronavirus epidemic could hurt the global economy. Canada is a trade and oil-reliant economy, which is why it becomes wary when global trade is disrupted.

Now investors expect that there are good chances that the BoC would cut the rate again next month if necessary.

Since the end of last week, major central banks joined forces to retaliate against the potential impact of the coronavirus epidemic. The US Fed and the Reserve Bank of Australia have already slashed their rates.

The BoC said that the epidemic was a significant shock to the country’s economy and anticipated that the spread of the virus would hit business and consumer confidence. The bank said:

“As the situation evolves, the Governing Council stands ready to adjust monetary policy further if required to support economic growth and keep inflation on target. The Bank continues to closely monitor economic and financial conditions, in coordination with other G7 central banks and fiscal authorities.”

This is the first rate cut since 2016 and the first time in 11 years when the bank slashed the rate by 50 basis points.

Canadian Prime Minister Justin Trudeau told the media that the government was expecting a slowdown in GDP growth:

“We are seeing an economic slowdown. There will be an impact and we are there to find a solution.”

While the fears of the coronavirus effect are considerable, Canada has reported only a few people with the infection.

Besides the coronavirus, the central bank cited several domestic factors that negatively impact the economy, including winter storms, rail blockades, weakening business investment, and a teachers strike in Ontario.

Later today, the GBP/CAD pair might become even more volatile after speeches held by BoC and Bank of England Governors Stephen Poloz and Mark Carney.

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