Foreign Currency Market Update – GBP / CAD Update
The Canadian Dollar has put in a mixed performance today ahead of Bank of Canada (BOC) statements and the Canadian International Merchandise Trade Balance data. Any dovish tones from BOC official Carolyn Wilkins today could pressure the ‘Loonie’ lower– a slight possibility given the bank’s preference a softer currency and the current strength of the Canadian Dollar, which has rallied 1.67% since the April 15th BOC meeting. Both the Pound Sterling to Canadian Dollar (GBP/CAD) and US Dollar to Canadian Dollar (USD/CAD) exchange rates advanced on Tuesday as oil prices ticked lower to $59.
The decline in Chinese manufacturing activity, which became evident yesterday, saw crude demand forecasts fall, pulling the CAD exchange rate lower against USD and GBP. Meanwhile, last Monday and Tuesday were extremely quiet for Canadian ecostats, leaving the ‘Loonie’ to fluctuate on account of US and UK data. However, Wednesday was a more exciting day for the Canadian economy with the release of the Canadian Industrial Product Price and Raw Materials Price Indexes. Industrial Product prices registered 0.3% growth in March, rather than the -0.1% contraction economists had expected. Meanwhile, the Raw Materials Price Index came in at -0.9% rather than the -2.0% predicted. As a result of the ecostats, the USD/CAD exchange rate hit a low of 1.1950 and the GBP/CAD currency pair dipped to 1.8458.
Thursday was another interesting day for Canadian Dollar movement with the highly influential Canadian Gross Domestic Product (GDP) figures released. The Canadian Dollar tumbled versus the Buck when GDP slipped from 2.4% to 2.1% on the year in February. However, the monthly figure entered neutral territory of 0.0% rather than remaining at -0.1% as forecast. Furthermore, Friday’s Canadian RBC Manufacturing PMI failed to offer any support by coming in at 49.0 in April, a shade below the 50.0 benchmark which separates expansion from contraction.
Investors in the Canadian Dollar can expect movement from the North American currency this week with the release of several key pieces of data. Wednesday’s Ivey Purchasing Managers Index is expected to record moderate movement, followed by Thursday’s equally important Building Permits number. However, Friday will be the key day for Canadian Dollar exchange rate movement, with labour and housing market states released. Housing Starts will emerge at 13:15 GMT and are expected to record a 182.0K increase in April after March’s 189.7K recording.
Shortly after at 13:30 GMT, Canadian Net Change in Employment and Unemployment Rate numbers will be published. If forecasts are correct and the North American Unemployment Rate increases from 6.8% to 6.9%in April, the Canadian Dollar exchange rate could sink. If that were to happen, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate could flirt with the 1.84 trading level, while the US Dollar to Canadian Dollar (USD/CAD) exchange rate could hover near the 1.22 mark. However, a favourable surprise or a significant oil price increase could see the ‘Loonie’ rally. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.8286. The US Dollar to Canadian Dollar (USD/CAD) exchange rate is trading at 1.2096.
Heads Up
Summary of major upcoming data releases that we think may move the market.