Foreign Currency Market Update – GBP / CAD Update
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate moved from a low of 1.8857 to trend in the region of 1.9182 before the weekend.
The pairing largely held these gains on Monday as the price of Canada’s key commodity, crude oil, slid amid oversupply concerns. A stronger US Dollar and an 82 cent decline in crude for July conspired to pressure the ‘Loonie’ and prevent the asset from advancing on peers like the US Dollar and Pound. Reports of increased production in Saudi Arabia and Libya outweighed bets that oil rigs in the Gulf of Mexico could be disrupted by a major storm and oil prices eased accordingly.
The GBP/CAD currency pair began last week on the back-foot as the unexpectedly strong Canadian labour market data (published on June 5th) continued lending the commodity-driven currency support. Sturdy Canadian housing data and a sub-par like-for-like sales figure from the British Retail Consortium (BRC) kept the ‘Loonie’ elevated on Monday, but the Pound began to recoup losses after the UK’s trade deficit was shown to have narrowed by more-than-anticipated in April. Further Sterling gains were accrued in response to sturdy UK Industrial Production data and the National Institute of Economic and Social Research’s (NIESR) encouraging GDP estimate for the three months through May. The Pound was then able to end the week on a high against a number of its counterparts as annual UK Construction Output came in more strongly than expected and UK GDP for 2014 was positively revised. GBP/CAD gains were a little limited, however, as Standard & Poor’s cut the UK’s outlook from stable to negative.
This week inflation data for both the UK and Canada is likely to be the main cause of movement in the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate. The UK is set to publish its Consumer Price Index (CPI) tomorrow and economists are predicting that the nation emerged from deflation in May after recording an annual inflation figure of -0.1% in April. If that proves to be the case, the Pound could advance during the European session.
Sterling’s uptrend against the Canadian Dollar may also be supported by the week’s other main UK releases – namely employment/average earnings figures and the minutes from the last Bank of England policy meeting. Results which would give the GBP/CAD exchange rate a boost include the UK unemployment rate holding at a multi-year low, average earnings increasing and the BoE meeting minutes showing discord among policymakers on the subject of interest rate revisions.
The week’s only major Canadian data, the nation’s own Consumer Price Index, is due for publication on Friday and is forecast to show that non-core inflation held at 0.8% on the year in May after climbing by 0.5% on the month. However, if Canadian inflation dipped in May it would add to the case in favour of the Bank of Canada (BOC) reviewing fiscal policy and may trigger Canadian Dollar losses before the weekend.
Heads Up
Summary of major upcoming data releases that we think may move the market.