Foreign Currency Market Update – GBP / CAD Update
The Canadian Dollar put in a mixed performance in Tuesday’s European trading after last week’s Bank of Canada (BOC) comments and rising oil prices continued to buoy the ‘Loonie’ exchange rate. The Canadian Dollar hit a fresh three-month high of 0.8287 versus the US Dollar (CAD/USD) on Tuesday.
Last Friday BOC Governor Stephen Poloz stated that in the second quarter of 2015 the Canadian economic outlook would be more positive, allowing for a stronger recovery in the second half of the year. However, the BOC chief branded first quarter Canadian growth as ‘atrocious’ and suggested that although the worst of the oil price declines are over, a quick recovery is unlikely. The speech on Friday saw the Canadian Dollar to Pound Sterling (CAD/GBP) exchange rate sink from session highs of 0.5473 to 0.5403 as the British currency gained strength against other majors on Bank of England (BoE) rate hike speculation.
The Canadian economy and currency both took a hit as oil prices tumbled by around 60% since last July. A global crude oil glut and record-high levels of production pressured the ‘Loonie’ lower and spurred mixed opinions on whether the price of black gold will pick up in the near future. However, Tuesday saw oil prices hover at a four-month high as concerns over supply disruption in the Middle East escalated. Geopolitical tensions in Yemen combined with a fall in US shale oil production has allowed oil prices to recover somewhat and could help to keep crude prices buoyant in coming weeks.
Governor Poloz stated that the fall in oil prices would be an overall positive for the Canadian economy long-term—a development that could support the Canadian Dollar significantly. Canadian data has been in short supply recently, but this week will be a little more exciting for the ‘Loonie’ with several important releases worth noting.
Wednesday will see the release of the Canadian Industrial Product Price and Raw Materials Price figures which could have a mild impact on the Canadian Dollar. However, Thursday will be the real showstopper for the Canadian economy with the release of the highly influential Gross Domestic Product (GDP) ecostat. On the year, February is forecast to record a decline from 2.4% to 2.0%, an event which could cause major Canadian Dollar weakness. Additionally, BOC Governor Poloz will be speaking again on Thursday, which could cause ‘Loonie’ exchange rate swings. Friday’s Canadian Manufacturing Purchasing Managers Index (PMI) will be another event of moderate influence; however, if the April figure can climb from March’s 48.9 to above the 50.0 growth benchmark, the ‘Loonie’ could rally.
Currently, Tuesday is forecast to be an interesting day for the US Dollar to Canadian Dollar (USD/CAD) currency pair with US Consumer Confidence data due out in the second half of Tuesday’s trading. The past week has seen the US Dollar decline against the Loonie, and a weak confidence figure could allow the Canadian Dollar to strengthen from its current 0.8287 firmly through the 0.8300 barrier.
Heads Up
Summary of major upcoming data releases that we think may move the market.