Foreign Currency Market Update – GBP / CAD Update
Friday’s session proved to be a volatile one for the Pound Sterling Canadian Dollar exchange rate. The pair briefly traded down into the 1.7900s following the morning release of a weaker than anticipated survey of the UK’s manufacturing sector. However, the early losses for GBP CAD were partly erased by an equally disappointing gauge of America’s manufacturing sector which pointed to a pronounced and unexpected month-on-month dip.
The continued shift downwards for global oil, which saw the price of a barrel of crude slide to its lowest level for 5 ½ years as the New Year began, ensured that demand for the Canadian tender has remained subdued during the past week. GBP CAD had been changing hands at above the 1.8100 threshold at the start of Friday trading; the pair broke to its highest level since Christmas, touching off 1.8126 just before the European session got underway.
If opinion polls in Greece continue to show that the left wing and fervently anti bail-out Syriza bloc is set to win the Hellenic state’s general election later this month, then oil prices could head lower still. Such an outcome would increase the pressure on the Loonie, potentially sending the GBP CAD exchange rate back up towards its 5-month peak of 1.8401.
However, the possible announcement of all-out Quantitative Easing from the European Central Bank later this month favours the export-driven Canadian Dollar, and could send GBP CAD lower once more. Investors will gain a vital steer on Wednesday regarding the likelihood of any expansion of the ECB’s asset purchase scheme to include sovereign debt, with the publication of the latest inflation data from the euroland. Most analysts predict that the official statistics will reveal that mainland Europe’s economy slipped into deflation last month, stoking market whispers that full-tilt QE may be on its way from the ECB’s Governing Council before the end of January. Look for GBP CAD to slide towards its key interim floor of 1.7542 if Wednesday’s eurozone inflation numbers do print at below zero percent. A strong showing from Friday’s North American jobs numbers would have a similar effect.
Heads Up
Summary of major upcoming data releases that we think may move the market.