Foreign Currency Market Update – GBP / CAD Update
The last five days have seen the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate advance from a low of 1.9136 to close out the week trending in the region of a four-month high of 1.9519.
A number of factors contributed to the ‘Loonie’s weakness against the Pound – including the run of surprisingly upbeat reports to emerge from the UK. Tuesday saw the nation publish its Consumer Price Index for May, with the rate of inflation moving back into positive territory after April’s dabble with deflation. Although CPI has a long way to go before it nears the Bank of England’s 2% target, the move in the right direction was enough to boost Sterling against several of its peers. The Pound-positive sentiment was reinforced on Wednesday after UK average earnings were shown to have increased by considerably more than anticipated in the three months through April – a result which could encourage the Bank of England (BoE) to rethink its timeline for increasing borrowing costs.
Thursday then saw UK retail sales print at 0.2% on the month and 4.6% on the year, beating respective forecasts for -0.2% and 4.3%. Canadian data, meanwhile, was more mixed and failed to support the Canadian Dollar amid the risk-off environment created by the situation in Greece. Canadian manufacturing shipments plummeted by -2.1% in April (far steeper than the forecast dip of -0.5%) while existing home sales climbed 3.1%. Wholesale Sales and Inflation numbers from the North American nation exceeded expectations in the second half of the week, but any positive impact from these reports was outweighed by a surprising drop in Canadian retail sales and falling crude oil prices. The GBP/CAD exchange rate rallied back to a multi-month high before the weekend as Canadian retail sales fell by -0.1% on the month (instead of climbing by the 0.7% expected) and the price of the nation’s main commodity lost two cents.
As the European session opened for a new week of trading, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending in the region of 1.9438, down -0.2% on the day’s opening levels. With no Canadian ecostats scheduled for publication this week, and the only UK data being of low import, GBP/CAD movement could be comparatively limited. That being said, global economic developments, commodity price shifts and US news may prove to be a cause of fluctuations. The US is set to release Durable Goods Orders figures, first quarter GDP and Manufacturing PMI. Any reports which increase the odds of the Fed delaying an interest rate adjustment until the end of the year have the potential to drive higher-risk currencies like the Canadian Dollar higher. China’s Manufacturing PMI, out on Tuesday, is also likely to have an impact on the performance of commodity-driven currencies.
On Monday the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending in the region of 1.9437.
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