Foreign Currency Market Update – GBP / CAD Update
An as-expected Canadian Consumer Price Index and slightly better than anticipated month-on-month Retail Sales figure failed to have any substantial effect on the ‘Loonie’ on Friday as the global oil situation continued to weigh heavily on the currency.
After a mixed week, having soared upward on an increased UK Consumer Price Index before falling back on weak Retail Sales, the Pound returned to trending strongly against the Canadian Dollar ahead of the weekend. An unexpected July surplus of 1.3 billion Pounds revealed by the Public Sector Net Borrowing report led to increased demand for Sterling and the. Encouraging news helped to bolster the GBP/CAD pairing to a high of 2.0695 as pundits moved away from the still-softening Canadian Dollar.
Dubbed ‘Black Monday’ in China, today has seen global stock markets plunge further to reach lows not seen since 2009 and the global financial crash. With the world’s second largest economy in an apparent state of free-fall and the People’s Bank of China (PBoC) having so far failed to halt the sliding shares, the values of a swathe of commodities have naturally sustained further declines.
In spite of dramatically decreasing price of oil, producers have nonetheless continued pumping high volumes of the commodity, resulting in increased stockpiles around the world that have only worsened the situation. Both Brent and US crude have shed more of their value today, respectively dropping to under $45 and $40 per barrel to reach levels not seen since 2009. Consequently the GBP/CAD exchange rate jumped up to strike a new seven-year peak of 2.0854 this morning.
Towards the end of the week the Pound may see further gains should the BBA Loans for House Purchase, UK Consumer Confidence Survey or second quarter GDP report deliver positive results. Although the expectation remains for a Bank of England (BoE) interest rate rise to come, at earliest, in the first quarter of the next year, any other signals of economic improvement have a strong chance to push Sterling still higher against rivals.
The situation does not look bright for the ‘Loonie’ in the coming days though, with no major domestic data releases due out and the rout of commodity prices expected to continue full-force. Pundits remain somewhat pessimistic regarding the near-term future of oil, the pervasive belief being that values will not bottom out for some time as the issue of oversupply is matched with declining demand from the world’s major oil consumer. Until prices begin to uptrend once more it seems unlikely that the Canadian Dollar will manage to rebound from its current lows.
Heads Up
Summary of major upcoming data releases that we think may move the market.