Foreign Currency Market Update – GBP / CAD Update
The past week saw the Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate dive and soar in an extremely sporadic fashion; the Pound reached a high of 2.0504 on Monday only to hit rock bottom of 2.0061 on Thursday. Sterling has gained today ahead of a mostly one-sided week of data releases for the pairing.
Last week, the Pound suffered from a lack of decisive UK economic results, while the Canadian Dollar profited from a minor rise in the price of crude oil and an average overall US Dollar performance. The first key economic release for the ‘Loonie’ came on Tuesday when the Canadian Q2 annual and monthly GDP results for June were announced. The monthly and yearly results rose by 0.5% and 0.6% respectively, but the annualised figure was decidedly less optimistic and confirmed the Canadian state of recession by dropping -0.5%.
Capital Economics’ David Madani stated that ‘With exports still struggling and business investment falling in response to the fallout in the energy sector, hopes for a sustained rebound beginning in the second half of the year look misplaced’. Madani’s analysis noted that low oil prices were a continuing bugbear for the Canadian economy, although the price did actually rise last week from sub-$46.00 per barrel to almost $47.00. That said, the price continues to remain close to its lowest in over 6 years.
The only other high-impact piece of Canadian data last week was the nation’s employment figures for August, released on Friday. The Unemployment Rate rose from 6.8% to 7% against expectations of stagnation, but the Net Change in Employment showed a 12K person increase, compared to predictions for a loss of -5K.
Despite today having no UK-centric data releases, the Pound has performed exceptionally well against all competitors, rising to 2.0275 against the ‘Loonie’ due to a surge in Sterling demand following a number of major debt-cutting measures being introduced by commodities giant Glencore.
This week, Pound Sterling/Canadian Dollar exchange rate movement may occur as a result of the Bank of Canada (BOC) and Bank of England (BoE) Interest Rate decisions, the BoE inflation projection for the next 12 months and the annual Canadian New Housing Price Index for July.
The BOC’s Rate decision is expected on Wednesday and while no change from the current 0.50% has been forecast, particularly hawkish or dovish comments from BOC members will be of major influence on the pairing’s movement. No forecasts have been made for the Canadian New Housing Price Index but if the previous 1.3% is anything to go on, a further rise is by no means unlikely.
Heads Up
Summary of major upcoming data releases that we think may move the market.