Foreign Currency Market Update – GBP / CAD Update
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is forecast to experience an interesting week of trading with the highly influential Bank of Canada (BOC) interest rate announcement due and both UK and Canadian Gross Domestic Product (GDP) ecostats scheduled for release.
The Bank of Canada took markets by surprise in January when it cut interest rates by 25 basis points to 0.75% after four years of holding steady at 1.00%. However, after some upbeat BOC statements, it’s unlikely the central bank will cut interest rates again on Wednesday. BOC Governor Stephen Poloz has previously stated that he expects Canadian economic growth to rebound in the second quarter of 2015 and therefore Friday’s Gross Domestic Product figures will be of note. On the year, GDP is forecast to remain at 2.1% in March; however, any additional increase could see the ‘Loonie’ exchange rate rally.
Meanwhile, the UK’s own GDP will be published slightly sooner on Thursday and economists have predicted growth to reach 2.5% in the first quarter year-on-year, up from the former 2.4% reading. Another factor that could continue supporting the Canadian Dollar is the recent rise in oil prices as global demand firms. Since April, crude oil values have been stronger and remained relatively stable at around $60 per barrel. Additionally, as unrest in the Middle East continues to heighten, the price of oil is continually bolstered.
Last week, Canadian inflation was shown to have slipped in April and the data pressured the ‘Loonie’ exchange rate lower, especially in light of rather upbeat US core inflation data. The Core Canadian Consumer Price Index fell from 2.4% to 2.3% in April, while the non-core measure tumbled from 1.2% to 0.8%. Economists had expected a slightly smaller tumble to 1.0%. As a result, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate spiked to 1.91, before slowly edging to 1.90 later in North American trading. The Canadian Dollar also slipped to its lowest level in a month against the US Dollar (CAD/USD), falling to 80 US cents, after the strong 84 US cents it hit in the middle of May.
Other key data releases which may impact the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate this week could be Friday’s GfK UK Consumer Confidence Survey, which is forecast to remain at 4 in May. However, with a host of influential US data out this week, it’s possible the Canadian Dollar may decline if the US economy performs well. Tuesday’s set to be an exciting day with the release of US Durable Goods Orders and US Consumer Confidence numbers, while Friday’s scheduled to see US Gross Domestic Product stats emerge. It’s possible that upbeat US data could see market hawks price in a US Federal Reserve interest rate hike in the near future, which would pressure the Canadian Dollar lower as its US counterpart climbs. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate is currently trending in the region of 1.9044.
Heads Up
Summary of major upcoming data releases that we think may move the market.