Foreign Currency Market Update – GBP / CAD Update
The Pound Sterling climbed to its highest level against the Canadian Dollar since November 2008 during early trading yesterday. The upward move to 1.9558 for the GBP CAD exchange rate was driven by investors’ concerns regarding Greece’s failure to present the eurogroup with a list of reforms required in order to gain a 4-month extension to its emergency loan package. Although the euroland’s Finance Ministers had agreed in principal to extend Greece’s line of credit late last Friday, the loosening of its existing loan terms was contingent upon Athens presenting a restructuring package to its creditors on Monday.
Continued concerns from investors regarding violence in the Eastern part of Ukraine have also served to anchor support for the export-driven Canadian Dollar during recent sessions. A ceasefire agreement between Kiev and Russian-backed rebel leaders, reached ten days ago, had not been adhered to with any conviction by either party. Nevertheless, Saturday’s prisoner swap, involving a few dozen soldiers from both sides, provided some grounds for optimism, as did Sunday’s news that the Ukrainian army had begun withdrawing its heavy weaponry from the front line. However, this process was halted at the start of this week, with Kiev policymakers claiming that rebel attacks had made continued movement impossible. Russian President Vladimir Putin’s weekend comments suggesting that the outbreak of all-out war in Ukraine was ‘unlikely’ also failed to inspire confidence. The Loonie suffered as a consequence.
Yesterday afternoon brought a pronounced improvement in the Canadian Dollar’s fortunes; comments from US Federal Reserve Chair Janet Yellen suggesting that a demand-dampening American interest rate hike might still be some way off helped to stoke support for the Canadian tender. Meanwhile, the official ratification of Greece’s reform plans by the eurogroup added to the positive mood enveloping the Canadian unit, sending the GBP CAD exchange rate back down into the 1.9200s late yesterday. The Southward shift represented a remarkable turnaround for the pair and there could be more near-term downside to come if tomorrow’s US inflation figures point to falling prices in the USA. GBP CAD’s February low of 1.8764 could rapidly become a target in such a circumstance.
Heads Up
Summary of major upcoming data releases that we think may move the market.