GBP/CAD is about to update the highest level since June, after touching it on October 17. The pair has surged 0.44% since the start of the Thursday session, to 1.7049 as of 08:33 AM UTC.
On Monday, the price managed to break the resistance line of a bearish channel, which opened the door to the current rally as we anticipated.
The quote became volatile when the Bank of Canada met to decide the interest rate decision and deliver its economic outlook. In the UK, Prime Minister Boris Johnson secured the parliament’s approval for an early election scheduled for December 12.
Bank of Canada Admits Potential Rate Cut
Yesterday, the Bank of Canada left the rates unchanged at 1.75% as expected by most economists but admitted that a future rate cut might be imminent. The easing measure might come as a reaction to the negative effects of the global trade conflicts, with the Sino-US trade war in the frontline.
The central bank reduced its domestic and global outlook, citing the trade tensions and uncertainty.
Governor Stephen Poloz told the media:
“(We) considered whether the downside risks to the Canadian economy were sufficient at this time to warrant a more accommodative monetary policy as a form of insurance against those risks. We concluded they were not.”
The Bank of Canada stated that trade tensions were impeding business investments while causing a decline in commodity prices, which is a problem for the oil-dependent economy.
The Canadian dollar has shown the highest year-to-date growth among G10 currencies. CAD is becoming attractive for investors as the US Fed, the European Central Bank (ECB), and other central banks cut interest rates and even increased stimulus to support their economies, which devalued their national currencies. However, this might be a problem for the export-reliant economy, given that a strong CAD means higher prices for products sold overseas.
The central bank reduced its GDP growth forecast for 2020 to 1.7% from 1.9% estimated in July. The outlook for 2021 was also reduced by 0.2% to 1.8%. The bank also expects a drop in exports and business investment in the second half of the current year.
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