Foreign Currency Market Update – GBP / CAD Update
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0140 to 2.0944 during Tuesday’s European session.
Last week saw intense market volatility following ‘Black Monday’, the name given to China’s equity market crash. The resultant chaos in the currency market caused significant changes to currency values, some of which have only just recovered to appropriate levels. The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate spiked to an eight-year high after commodity-correlated currencies were considered far too risky. However, after the People’s Bank of China (PBoC) and the Chinese government intervened in the markets to prevent further losses, traders were quick to engage in profit taking and return commodity assets to previous levels.
Over the past three days, oil prices posted the biggest gain since 2009. This steep appreciation in crude prices caused the Canadian Dollar to rally versus many of its major peers. In addition to rising black gold prices, the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate declined over the weekend in response to further profit taking.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending in the region of 2.0251 ahead of Canada’s growth data.
On Tuesday morning, the Canadian asset declined versus the majority of its competitors due to a sharp drop in oil prices as China’s manufacturing activity remained in contraction territory. The disappointing Chinese data caused oil futures to tumble significantly, weighing heavily on demand for the commodity-correlated Canadian asset. Later during Tuesday’s North-American session, Canadian Gross Domestic Product is due for publication. June’s annual Canadian growth is forecast to rise by 0.5%, whilst second-quarter annualised quarterly growth is predicted to decline by -1.0%. A poor result in Canadian GDP will intensify mounting concern that the Bank of Canada (BOC) will be forced to intervene in order to accommodate for the sharp drop in crude oil prices.
Meanwhile, the British asset softened versus some of its currency rivals on Tuesday after manufacturing output failed to meet with expectations. August’s UK Manufacturing PMI came in at 51.5 on a seasonally adjusted basis, missing the median market projection of 52. The Pound is managing to hold gains against some of its currency peers, however, thanks to recent hawkish comments from Bank of England (BoE) Governor Mark Carney. Carney stated that the situation in China will not deter policymakers’ goals of hiking the cash rate in the first quarter of 2016.
Looking ahead, there will be several influential economic data publications with the potential to provoke changes for the Pound Sterling to Canadian Dollar exchange rate. Although Canada’s economic docket is relatively sparse of influential publications, Friday’s Unemployment Rate and Net Change in Employment should provoke volatility. In terms of British data; the Construction, Services and Composite PMIs will be of most interest to those invested in the British asset.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate was trending within the range of 2.0186 to 2.0332 during Tuesday’s European session.
Heads Up
Summary of major upcoming data releases that we think may move the market.