The GBPCAD was 0.3% lower on the day after the Bank of Canada (BoC) held interest rates at the 0.25% level. The Bank is also continuing with their quantitative easing program, which has seen purchases of at least $5 billion per week of Canadian bonds.
In a statement, the BoC said: “The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support.”
The pound has been under pressure this week after the restart of Brexit talks, with Prime Minister Boris Johnson saying on Sunday that the U.K. would walk away from talks if no deal I agreed before October. The comments are the latest in a hostile mood between London and Brussels and without a deal the two trading partners would revert to World Tarde Organization rules. This would include tariffs on goods and the situation is lending support to the Canadian dollar.
The BoC noted a desire for 2% inflation in line with the Federal Reserve and the bank noted that the bond buying would continue to take up the slack in inflation prices.
The GBPCAD is heading for a fourth-straight day of losses and the price has broken through the 50 day moving average around 1.7250. Buyers have emerged at 1.7070 and gives the potential for a bottom, but larger support is ahead at 1.7000 and the market may look to test this level.
GBPCAD Daily Chart